Hmmmm difficult one.
As a developer and publisher of apps for Windows Phone I had to make the same decision.
"Paid for" does indeed result in fewer downloads, and sometimes your app won't even be found, as some users only play free games, so never ever look in the "Paid" section. Even if you offer a trial mode, that's no help as your app / game is still listed in the "Paid" section, so a huge amount of users will never find it.
Making a game free is of course going to result in many more downloads, but to make some money you'll have to annoy your users with ads. In my own app, because of the way the app is structured, I actually have around 10 ad banners in the app, at strategic locations e.g. on each page of a pivot.
Problem is ad revenue is limited. I can speak from personal experience. If you have a killer app, like Wordament, or Angry Birds, then that's different, but a lesser app isn't going to generate a lot of ad revenue.
For my own app I decided to make the best of both worlds. I put out a paid for, and free app. The paid for app is fully featured, whilst the free ap is 99% fully featured with ads. If the user playing the ad supported version wants to remove the very few limitations they are directed to buy the full app.
I have to say that my paid for revenue far outstrips my ad revenue by a massive order of magnitude.
Now there's a flip side. As a "user", I do pay for some apps, depending on their usefulness, but games, I hardly ever buy an indie game. I pretty much exclusively only ever buy xbox live enabled games on Windows Phone. Why? Because I'm part of the xbox live ecosystem. I have an box 360 and Xbox One, my mtes have an Xbox, and we compete for points and achievements. I try and get achievements wherever I can. I'd rather buy an xbox live enabled phone game for 79p or even ?3.99 for the achievements than spend 79p on an indie game.
Unfortunately Xbox Live games on Windows Phones do attract the lions share of users for those very reasons. Though admittedly Xbox Live games on Windows Phone is becoming a rarer occurrence these days. Microsoft need to adopt the same Xbox Live policy they've adopted for Xbox One. i.e. approve studios / developers for Xbox Live, don't charge for the XDK, nor publishing, no updates, and instead just take a cut of the download revenue.
Microsoft reduced the costs of Xbox Live to developers on the 360, have pretty much wiped it out on Xbox One, but on Windows Phone I believe approved developers still have to pay huge amounts to get the XDK, pay to publish, and even worse pay to update their games!!
Regards,
Glenn