Amazon has introduced a cheaper version of the Kindle 3G ebook reader with an ad-supported version. The pricing of this new ebook reader will be $164.

Just hours later, Barnes & Noble counterattacked on pricing, announcing a low priced $139 Nook.

The new Amazon product is being sold as Kindle 3G With Special Offers. It includes on-screen ads and is $25 cheaper than the standard Kindle 3G.

Last month, Amazon began selling a Wi-fi only Kindle with ads for $114.

Amazon has continuously decreased the Kindle's price since first releasing it at $399 in 2007.

Amazon is also attempting to entice Kindle buyers with a pair of Kindle-related promotions available in the coming weeks, including $1 for a Kindle book getting a free $10 Amazon.com gift card when spending $10 on Kindle books.

Amazon says Kindle 3G with Special Offers includes: 

* Free 3G wireless , no annual contracts, no monthly fees

* Global 3G coverage means books in under 60 seconds in over 100 countries and territories

* Paper-like Pearl electronic ink display, no glare even in bright sunlight

* Lightweight 8.7 ounce body for hours of comfortable reading with one hand

* Up to two months of battery life with wireless off eliminates battery anxiety

* Kindle Store with over 950,000 books - largest selection of the most popular books

* Seamless integration with free Buy Once, Read Everywhere Kindle apps for Android, iPad, iPod touch, iPhone, PC, Mac, BlackBerry and Windows Phone