Short extract from the findings of an interesting, indepth survey into ebook sales and pricing. Highly recommended:
An indie ebook author earns about $2.00 from the sale of a $2.99 book. That book, on average, will sell four times as many units as a book priced over $10.00. In order for a traditionally published author to earn $2.00 on an ebook sale, the book must be priced at $11.42 (if the publisher has agency terms, as Smashwords does) or $16.00 (if it’s a wholesale publisher). Remember, traditionally published authors earn only 25% of the net, whereas Smashwords authors earn 85% net. If your book is traditionally published, and your publisher sells under the wholesale pricing model, you earn only about $1.25 for a book priced at $9.99, whereas an indie ebook author would earn $6.00-$8.00 at that price.
If a reader has the choice to purchase one of two books of equal quality, and one is priced at $2.99 and the other is priced at $12.99, which will they choose?