Chicken and egg problem. There are enough free apps that they drag down user expectations for pricing. It's hard to figure out value on an absolute scale ("hmmm, is this worth $4?"), and easy to compare value on a relative scale ("wow, $8 seems expensive for an app"). Ads push the app market downwards.
> I'm curious what revenue model you would suggest for apps that wish to remain free
The same revenue model I'd suggest for any other kind of regularly produced content that can't charge or doesn't want to: patronage, subscriptions, sponsorships, merch, add-ons or regular updates that people want to pay for, services people want to pay for. Have you ever read some of the behind-the-scenes details from YouTube channels that support the people making them? Ads don't even come close to paying the bills, even if you're huge. Patronage, subscriptions, sponsorships, and merchandise do.