eBook pricing - what's best for everyone?

With a recent partial-settlement on that big Apple eBook collusion case in the States, I've been asking myself: when it comes to selling eBooks, what is best for everyone?


Apple and 5 big publishers allegedly colluded to set ebook prices (that's illegal) using what's known as the agency model (that's not illegal), whereby the publishers set the RRP and Apple collected 30% (whoa! - that's a high commission).


Why did that all "allegedly" happen? Were publishing houses concerned about their dropping profit margins? I mean, surely since there was no longer the whole, I dunno, printing process, transportation etc ebooks would intuitively be significantly cheaper right? Unless maybe publishers saw an opportunity to have increased profit margin with ebooks because of the reduced costs of production? Maybe Apple was just ticked that the Kindle eReader / Fire tablet was encroaching on iPad sales? (not sure about the timing for that last point.) Or publishers were ticked that Amazon was driving down the price of ebooks and thereby reducing any possibility of increased profit margin?


So who are the parties in this debate and what pricing would be ideal:
authors - a high equilibrium price so that customers are happy with what they are paying but also maximises what the authors can get in royalties or whatever it's called
publishers - as above (maximising profit)
ebook sellers all over cyberspace - as above
book buyers everywhere - lowest price


Hmm, I see a theme emerging here.


But, is the lowest price really the best for the customer? If you look at the bigger picture, you should be willing to pay a fair price otherwise the product will go out of production because it's no longer worthwhile to produce...


Now don't get me wrong - I'm not predicting any end to the world of ebooks! I'm just talking about economics! (who knew that 1st year macroeconomics course would come in handy one day...or was that microeconomics?)


So what is really the best way to achieve this market equilibrium? Setting the price and annoying customers, or allowing the market (a.k.a. customers) to decide the price? And are those two options really the Apple v Amazon argument?

Okay I've become a bit sidetracked and I have done no research, but I'd be interested to know other people's opinions on this...


Pictures from ifunia.com and michaelhyatt.com