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Originally Posted by DiapDealer
Agency may have actually caused Amazon to make more money per Agency title than wholesale. It's just their contention that they sell less books at that price.
Remember that a "race to the price point that yields the most profit on the total sales of that product" is not the same thing as a "race to the bottom." It's in Amazon's best interest to NOT go below the former, too. And they're also in a better position to know where that price point is than anyone else.
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That is an unproven assertion. Amazon is in a position to know how much they sell of a specific book at a specific price. It doesn't follow that they are in a better position than the publishing industry to know what is the most profitable pricing model to price books at. Publishers have been studying the problem, doing experiments and collecting sales figures at various price points for far, far longer than Amazon has been around. Amazon seems to be unwilling to accept the idea that the right price for the latest JK Rowling book may not be the same as the right price for whatever is being churned out by various indie writers. Name recognition matters a lot when it comes to authors.
For all practice purposes, we have seen with pc's, DVD players and the like that if you assume one ebook is as good as the next, then the race to the price point that yields the most profit on total sales of that product _is_ a race to the bottom. There is always someone out there who will under cut your price.