Part of the cost issue is that you are making the assumption that this model of distribution is substantially more cost effective. It may well be cheaper, but not in such a significant way to warrant a price drop on the magnitiude of 40%.
In the print version you have the following basic costs:
Proof Readers
Printing costs
Distribution
Management
In the digital version you have:
Proof Readers
Management
Production costs
Maintenance of the digital distribution network.
So you aren't changing your costs because you still need proof readers and management. Instead of paying to have the book printed you are paying to have someone convert it into the format that you plan on publishing it in. This job may sound like it is cheaper because it involves less supplies and fewer people to do it (plus the book is already on a computer before it goes to press), but you are having to pay people a higher wage because they are required to have at least a BA in Computer Science or some such, instead of the untrained workers you had before.
Throw in the costs of maintaining the network that Kindle uses to get books on the appropriate devices, and the amount you have to pay the nerds running that network. Now you're looking at an endeavor that is more cost effective, but not necessarily significantly cheaper.
When you say "management" do you mean supply chain management or editorial costs? I can see the latter, but not the former (unless you're talking about the server space and IT force needed to run the digital version). In reality, the costs to run a network (space on a server farm, virtual environments, software and middleware) are still cheaper than maintaining a backlist and frontlist.
You count production costs in the digital version, but not in the print version (needed in both). Costs for formatting can most frequently be done in-house--particularly for pubs with a large quantity of titles that use XML workflow--with little to no extra cost.
Keep in mind that most pubs need to keep both their old titles in stock, refreshing it with new editions (aka a backlist), and new titles you hope to hit the bestsellers list (frontlist). All that printing comes with a whole host of costs...not just printing. First the production costs (already mentioned and needed for digital and print), then the other prepress work (initial costs associated with setting up the presses), printing itself, then the shipping costs (most printing is done in Asia these days), and storage/warehousing.
Also, the pricing of less than 40% is specious. Ten years ago, the publishing success of bestselling large hardcovers (like the John Addams bio by David McCullough) pushed the acceptable cover price for new hardcovers way up. This was done partially due to rising page counts (more signatures...more cost), but also to account for greater discounting at most retail outlets.
It's called "packaging." The public expects to pay more for a pretty hardcover, but not as much for a mass market, and even less for a digital version.
