As others have mentioned, most geographic restrictions are due to contractual obligations. In short, the primary beneficiary here are the authors.
Also, on a fundamental level it doesn't make sense to treat paper and digital sales the same. It's common, unfortunately, for consumers to demand they be identical when it's to the consumer's advantage, and treated different when the differences are in the consumer's advantage....
On a separate note, it isn't easy for a retailer to do business in 180 countries. Each country has its own tax obligations (e.g. UK charges VAT, US does not), its own laws, its own currency, its customer service needs (e.g. an Indian and American customer may expect customer service reps to act completely differently) and so forth. It's not impossible, but it isn't trivial either, and not many retailers really have the infrastructure to handle international sales.
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Originally Posted by rogue_librarian
No, but that's an extreme case. It usually means that the publisher who acquired the rights for your geographical location hasn't managed / bothered to release an ebook yet.
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Sort of, but it isn't always a matter of "can't be bothered." There are so many backlist books with small sales, so many contracts, so many authors and so many estates, that this can't possibly be sorted out in an equitable fashion overnight.
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Originally Posted by rogue_librarian
Why are there different regions anyway?
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Because, with the exceptions where languages are shared, most international editions involve translations and local marketing.
As to the idea of indexing pricing based on regional cost of living, I'm not sure that's the case. As far as I can tell, books aren't a commodity that can be produced cheaply in one area for international consumption; i.e. you can't have a writer in Nigeria or China re-write a Stephen King book at a fraction of King's royalties and advance.
In addition, in many cases a price differential is based not on the cost of living, but on national taxes. For example, gasoline costs over twice as much in Europe as the US, purely because of taxes.