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Nice post Randolph.
I think you actually already partly explained the difference in royalty rate Amazon is willing to pay for the 0.99 to 2.98 range and the 2.99 and higher. They have fixed costs and the low income they will get on the low prices might not be enough to compensate at higher royalty rates.
The situation is probably more complicated, if I understand correctly the two contracts Amazon offers are different in other details as well. But it might be a bit premature to blame the publishers for this policy.
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