[cowboyhero]

Because they're desperately trying to protect the sales of hardcover books, and, in part, trade paperbacks. They don't want to risk cannibalizing sales.

Consumers look at ebooks like another variation of the same product. Publishers don't. To them, it's an entirely separate entity. To them, the question you're asking could be (very roughly) translated to "I don't understand why concert tickets aren't the same price as a CD. It's the same music."

It's a bit backwards, and the same kind of thinking that made the MPAA consider the VCR a threat to movie theaters and the MLB think that nobody would buy tickets to the ballpark if games were broadcast for free on TV.

But I can understand why they're doing it. An enormous part of their legacy business model is wrapped up in hardcover book sales.

As for production costs, it would only be paper, printing, and distribution. Nobody ever thinks about pre-production costs or employee costs in professional editors, typesetters, and jacket design. That's a lot of dough that they have to lay out that still needs to be paid out whether we're talking ink or bits.