I think the person who proposed this idea may be laboring under the misapprehension that most of what Amazon sells is books. This hasn't been true for a long time, though, and so giving people free kindles won't stop them from ordering flatscreen TVs and computers and DVDs and games and CDs and kitchen appliances, etc. from Amazon. So I don't think that there's much cost savings to be found there.
Plus, as others have said, it's not like the Kindle isn't selling like crazy. To people with Amazon prime accounts, even.
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