But it is "paradoxical" (or lets' just say, confounding) from the perspective of traditional economics -- i.e., it is hard to construct a model which accounts f

But it is "paradoxical" (or lets' just say, confounding) from the perspective of traditional economics -- i.e., it is hard to construct a model which accounts for this behavior if you consider consumers as rational actors. Actually it's easy, and the last comment on the article nailed it. Ebook pricing is an iterated "ultimatum game": http://en.wikipedia.org/wiki/Ultimatum_game http://en.wikipedia.org/wiki/Ultimatum_game. A copy costs the publisher essentially nothing, creating a large amount of economic surplus to be divided between the seller and buyer. By setting the price higher than a physical book, the seller is attempting to capture almost all of the surplus, similar to keeping $99 and offering the other player $1 in the ultimatum game. In both cases if it's the only offer you're ever going to get, it's rational to take it because it's the best you can do. But in reality there will be future interactions with sellers. Refusing a slightly beneficial deal (and encouraging others to do so, in the case of reviews) will likely encourage them to offer more favorable deals in the future, producing a net benefit for buyers.