That's an interesting point, and changes how I look at the new kindles. I had assumed the marginal cost was closer to the ad-free version, and the ads subsidize the price for those who can't afford that. But if the marginal cost is less than $79 it could just be an elaborate price discrimination strategy. Fascinating!

I guess the real question, then, is what's the marginal cost of a Kindle? I haven't seen any tear downs of the new version indicating the component prices.