This only scales so far. Once more books are priced at impulse levels, it will provide less of an advantage and ultimately hurt your bottom line compared to the current typical price level.

It's similar to web apps being "free" in order to attract eyes/users. I think competing on other fronts (quality, connection with users/readers, obsession with consumer satisfaction) are preferable to cutting price because it's "too easy" to compete on price

Got any examples of this? I mean, lots of stuff (gum and "People" magazine at the grocery store, screwdriver bits and flashlights at the hardware store) is priced at impulse levels in lots of stores, lots of types of stores. Whose bottom line is that hurting? Dewalt's or Wrigley's or Maglite's? I don't really think so.