[ghaff]

The production costs are probably not as different as you think. The variable cost of a hardcover book is in the neighborhood of a few dollars though the exact figure depends on the size of the print run and some of the costs are buried in the cut a distributor usually takes. (As a benchmark, an author-ordered PoD copy of my ~250 page trade paperback from Createspace costs $3.75 before shipping.)

So e-books should be cheaper than physical books, all other things being equal, but the cost difference isn't as much as many assume.

[_delirium]

Publishers aren't that forthcoming on costs, but for large-print-run, mass-market paperbacks, numbers I've heard thrown about are a cost of less than $0.50/book. So I wouldn't expect much savings from going digital. Similar situation to software: the move from boxed software to digitally delivered software didn't make it any cheaper, because the cost of the box and CD-ROM was not really a significant part of the price.