asymco's Horace Dediu has an interesting take on the continued existence of the iPhone 3GS; essentially it is still being kept around so as to "steer adoption of the iPhone 4".
The iPhone 4 is clearly better from a hardware angle, the only downside is price (natch). But I think the 3GS is still around to serve 2 main purposes:
1) Reduce supply pressure of the iPhone 4. Even as iPhone 4 production ramps up and months after its launch, there is still widespread shortage worldwide. Whereas a potential customer might be sitting on the fence with regards to a purchase decision, the existence of a 3GS provides a low-cost "gateway drug" to get into the iOS ecosystem of App Store, excellent web browsing experience etc.
2) Preserve value of the iPhone brand. Many new iPhone 4 owners have upgraded from n-1 (3G or 3GS) and the continued sale of n-1 by Apple itself means the depreciation cost of n-1 phones is minimized. Owners with carrier contracts can upgrade to the next n+1 device at minimal outlay of cash with the proviso of extended carrier contracts (24 months in this part of the world), which is not necessarily onerous outside of the US. This strategy allows the iOS apps inertia to snowball.
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