I've heard so many ups and downs for Dead Island ... $12 is sooo close to my $9.99 mental price...
I've upped my price for games I really want to play a few bucks from $9.99. Alan Wake, for instance, had been worth every penny of the $14 or so I paid for it.
I've been playing it a lot and I'm only in episode 4. But AW did get pretty good reviews all around, and Dead Island is more of a mixed bag. I think I'm going to wait.
I think my Steam pricing is like this:
$5 or under - grab it unless I know for sure it's a waste.
$5 to $10 - grab it if it's a game that's intrigued me (flawed games with great features such as kick ass graphics often fall here).
$10 to $15 (new category) - I find myself getting games I know I really want to play (like AW) when they drop in here.
I've only bought a few games ever that were higher than that.