They perfectly understand how this works. Google's primary goal with Nexus devices isn't to make a profit from handset sales. It is to sway more people, specifically iPhone users (in the US and other countries with carrier contracts) over to the Android platform to generate more ad revenue for them. They're saying "Hey, for a little more than the price of an iPhone on contract, we're giving you a high end phone which you can freely use with any carrier of your choice." This makes the American consumer think twice before signing an iPhone contract. If Samsung or another major Android OEM sold unlocked phones at Nexus prices (thereby still getting people to use Android / Play Store), Google may not be making devices at all, except for developers.
India is a completely different market. We do have quick iPhone access from carriers like Airtel and Reliance but these schemes haven't seen much success. Our people like to play it safe and whip out their calculators for everything before making a big purchase. In general, we aren't as easily enticed by monthly payment plans and we think hard about how much these phones will cost us in the long run. Outright purchase after finding a good deal is the norm here. So coming to Nexus availability, it doesn't really matter too much for Google. A guy who is unable to buy a Nexus phone here due to insufficient supply will NOT spend 15k more to pick up an iPhone. Instead, he will most likely look for another device in the same price range from an Android OEM like LG, or Samsung, or Sony, or whatever, which still results in ad revenue. Google has their work cut out for them. They don't lose much at all from being late with their supply here. In fact, their analytic have give