You are quite right, in that prices are set to whatever the market will bear. You're viewing things from the perspective of an individual price setter though.

I was talking more in terms of a bigger picture view: In a competitive market with high net profit margins more competitors should enter the market & undercut the existing prices. Mean that in the long run, the sales price of an item should approach the cost price. Now producing & delivering an additional ebook costs perhaps 1 cent, while producing an additional paper book costs perhaps a dollar. So ebooks should be sold at 1 cent + minor contribution to fixed cost + near zero profit, while paper books should be sold at 1 dollar + minor contribution to fixed cost + near zero profit. i.e. ebooks should be dirty cheap compared to paper books.

Yet in practice ebooks are somehow maintaining their prices way beyond what one would expect per economic theory. Little surprise then that various publishers are currently in trouble for price-fixing of ebooks.

Courts work slowly though & in the mean time I'm still pissed about the price I'm paying for those (badly OCR'd) bits & bytes.