Of course free stuff is always better for the consumer and its no surprise that people feel betrayed when you put a 5$ price tag on something you gave away for free yesterday, and rightfully so. I don't like the poor students argument to be honest, simply because you can just extrapolate that and demand skyrim itself to be free.

You have a point though, the current state does feel unhealthy, but is that really a problem of the system or just how it got implemented? Hell, many modders side with the players here, that's how bad Valve tackled this. If they put that system in place on cities skylines, with a TRUE pay-what-you-want option, and a decent way to filter for paid / free content, doesnt it look reasonable? Of course prices are outrages currently, nobody knows how much anything is worth, so they go for 5$ for a nice looking sword for a game you can get for 3,75$ currently. There are many scummy people who try to make a quick buck with 10-minute assets or even stolen ones, just skewing the picture even more.

And what if it is broken? How do they get a refund then?

Now this is indeed something that worries me, and I can't come up with a solution for it. first I thought it would be good to be able to refund after every update of the mod or the game, but thats not really feasible, and ultimately allows me to use a mod for months and then just refund later on, so that doesnt work. I came to the conclussion that either the modder has to have a good reputation and fixes his mods or the price for the mod has to be low enough that I won't feel betrayed if it only lasts me a week. Reviews of mods will become more important too, as many flaws won't be obvious the first day. I do feel like the refund period should be longer, but then again, if its a content mod that you can play through in a week, you shouldn't be able to just return it either, should you?