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Also, developers have to be carefull of how much they put on a demo, i remember a football game on a demo some time ago and it let you play a full 5 minute match with two halves. The game was not bad but i decided not to get it as i have a full match here. Its things like that, that make the demos so short, developers dont want to give you an exscuse not to get the game do they. :D
But im sure your right, if the demos were improved by being longer or having that restart option then im sure the games may sell more as you have a better experience with the game in question.