I don't owe anybody to spend my free time working on a game, either. So I won't. I do some mobile app development when a client pays for it, but mostly they pay me to work on other stuff.
I would love to spend time on a game, but whenever I try I lose interest after the juicy bits work in principle. Most of the work to get it polished are boring details that I don't particularly enjoy working on. I simply don't have the skills to produce good graphics, so I'd have to find a professional to do it for me. If I can pay for it, this is much easier.

In the end, I simply won't do it. If I spend my spare time on a project, and you don't even think it's worth paying me a beer for it but still go through the effort of downloading a pirated copy elsewhere, then this is a slap in the face.
I don't owe anybody to take that, either.

You call me greedy, because I want users to pay a minimal amount for my work. At the same time, you still install a pirated copy.
You complain about getting "raped" by ads, but aren't willing to give developers another option.

Good for you. What are your favorite open source games? Do you help developing them? Or is free (as in beer) the only attribute that is important to you?
And if what you say about the quality is true, then why do you feel the need to pirate software in the first place?

You enter an agreement when you install software, too. If you don't want to accept this agreement, then don't install the app.

There is an unlimited supply of copies, but not of titles. Whenever a developer makes a decision whether to spend time on a project, s/he will consider the opportunity cost of not doing something else instead. If the unlimited copies of existing apps are enough to fill demand, then the developer is best advised to not waste any time.

In the long run, getting a share of content sales will make them more money.
Advertising budgets are limited. The value of ad space goes down if there's too much of it. Not just because of oversupply, but because banner blindness leads to a lower effectiveness of ads. It also reduces the value of the device itself, since it will be perceived as nothing but a carrier for ads, and the lower revenue will lead to less apps to get developed.

What they need is a mixture of both. A share from payed content, and a small enough amount of ad space to be sought after.
An ads-only strategy will lead to the same result as on the Web. It will annoy users and result in low-quality content. Just look at how much trouble newspaper sites are having.

But right now, gaining market share on the mobile OS market is paramount. Profits come later. Unfortunately, quality of apps are important to gain market share.

Which leads to another problem. If I provide an ad free version, many will use the pirated ad-free version instead of the one that actually generates income. Therefore, there is something to be said for not providing an ad-free version at all.

Luckily, I have other options. I can just do normal client work instead of working on that game, and bill by the hour.

Thank you for your encouragement. I was a bit hesitant to do this, because I personally would rather pay a small amount and not get harassed by ads. So many others are doing it already. This has made ad space cheap, it will take a significant number of ads for me to recover my costs.
You've already seen how this works on the Web. Luckily ad blockers won't work, so the video commercial I'll have to play in the beginning won't have to be too long.

Say I want to sell a small game. Nothing special, but fun to play non the less. It didn't take several man years, but it wasn't a weekend hack, either.

Someone who doesn't have any other games installed would happily pay a few bucks to play it once in a while. It would be well worth it.
If another person has a habit of pirating, then this one probably has dozens other games already. The more alternatives he has to play with, the lower the value of my game to him. He'll probably end up pirating it because he's curious about it, and spends the money on the latte at Starbuck that he drinks while playing instead. He may even have the honest intention to buy it eventually, you know, if he ends up playing it a lot. But in the end, there are so many other pirated games he could play, and by the time he spent hours playing it, he gets bored and tries something else instead, and the cycle repeats.

With so many pirates out there, how should I price my game? Do I price it for the first person, who doesn't have many other games, and for whom the added value the game brings to his life is, say, $10? Or do I price it for the other, who already has plenty of alternatives, and for whom the added value is negligible?