I think it's interesting to identify a consumer focus on status/UX/psychological benefits, but I actually think it's wrong to say that the consumer isn't paying for more functionality because I think the iOS app ecosystem actually provides pretty compelling additional functionality in addition to the incremental, but still relatively meaty, upgrades between phone models and nominally nicer UX.
I mean, the App Store is still much better curated than its open Android counterpart. The iOS development seems to have more robust developer tools, offer better return, have a more or less standard device structure for testing, etc etc. (http://thinkapps.com/blog/development/platform-build-first-i...)
The iOS ecosystem isn't just the handsets. It's the App store, the developer tools, etc. This allows developers to better create functionality on top of all these Apple devices and enables Apple to surface those quality apps/functionality better and faster. That's a significant benefit.