Check the post link for more Amazon/Apple analysis
The problem is that in the real world of business, pricing has to bear some relationship to cost. No one is going to beat the iPad by building a product of equal performance and quality for less. Apple has mastered the supply chain and, with sales of the iPad in the area of a million units a week, achieves considerable economies of scale. It’s in the rare and wonderful position of offering a premium product while actually enjoying a cost advantage over competitors.
That means that no one can hope to compete with Apple simply by offering a product similar to the iPad for less. If Apple were to perceive it as a threat, they could underprice the interloper while feeling less pain than the competition. It’s a game that only Apple can win.