I have recently read a blog post by one of my classmate, Gurinder Mahal. One of his posts talks about how Amazon lowers the cost of e-books to increase profit and revenue. This is his blog.

He stated a really good point on how usually firms will increase their selling price in order to gain more profit, or they reduce their costs. E-books sold in amazon went from $14.99 to $9.99 as part of their strategy to increase profit. I also realized how e-books costs are much lower than normal books since it does not require any printing of paper. With such low costs, author, writers and Amazon can gain much more profit.

They decided to decrease their price due to the fact that consumers will become more attracted to their e-books since it can be treated as a “discount”. They would also require to buy a electronic device that can read e-books. On the amazon website, the first thing that pops up is how their product, Kindle, is the most “affordable — with one touch”. Since they gain more attraction for e-books, consumers are also forced to buy their product Kindle, as treated like a complementary good. In one way, Amazon is gaining more profit, and they are also increasing sales not just for e-books but also Kindle. Just like hitting two birds with one stone.