Amazon Kindle e-readerIt's a price war!

Mere hours after Barnes & Noble (BKS) said it plans to reduce the price of its Nook e-reader, Amazon (AMZN) responded in kind by reducing Kindle prices by 30%.

Barnes & Noble announced the Nook price reduction, from $259 to $199, on Monday, and also said it would release a new lower priced, WiFi-only version of the Nook at $149. In a statement, Barnes & Noble touted the Nook as "the first under-$200 dedicated full-featured e-book reader that offers both free 3G wireless and WiFi connectivity."

Not to be undersold, Amazon acted swiftly Monday to cut Kindle prices from $259 to $189 -- $10 less than the new Nook price.

The escalating price war reflects the growing popularity of e-readers as well as the Amazon and Barnes & Noble's desire to offer a lower-priced alternative to Apple's (AAPL) wildly popular iPad tablet computer, which retails for $499 and up.

"This makes Amazon look scared," says Simba Information analyst Michael Norris. "A lot of this is insecurity because the Kindle is all about the perception of being a leading device, not necessarily actually being a leading device. And if anything challenges that narrative they're going to respond."

Amazon originally debuted the Kindle at $399 in 2007. But the advent of the iPad -- and the forthcoming flood of multi-featured tablet devices -- have driven prices for single feature devices like the Kindle and Nook ever lower.

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