[tomsem]

Profit margins are one thing, but there is also pricing psychology.

I think the publishers don't want to see the price of 'books' go from $25 (retail) to $10. Even if a customer cannot actually buy an ebook for $10 (because they don't own an ebook reader), the existence of 'the same' book at a much lower price is going to play with their minds, and they will not feel that $25 is a good value, and they'll spend that money on something else.

So a good strategy for them is indeed to price the ebook closer to the street price of the print version. And they do, generally speaking. But Amazon (in pursuit of its interest to own the ebook market) undercuts them by setting the price lower for best sellers, and they are kinda stuck with that model since Kindle customers have come to expect it (at least I have, even though I haven't bought a best seller yet).

It just remains to be seen who wins this tug of war on the perceived value of a 'book'. I think Amazon's position is pretty strong right now, but it's far from clear where it will wind up in a few years.