What time frame should Microsoft counter with their own price drop and by how much?

I am thinking the right and smart decision is to wait about one month and see how much of an impact the immenant PS3 price deduction will have. I think the perfect price cut in either early summer or late summer should be as follows if Microsoft were to make such a cut:

elite: $299.99 with increased HD space of 200-250 GB. That way it matches the premium price of the PS3 while having the HD space to justify its premium price.

pro: $229.99 with same specs.

arcade: $169.00 with same specs.

I think if Microsoft stick with my suggested price-cut, along with a couple of huge unanounced new AAA games along with a semi-megaton announement (they seems to have one at every E3 from GTA4 to FFVIII), then I don't see no reason why they shouldn't be able to maintain or increase their lead next year over Sony.

Except for the spending Christmas money during early January, console sales are pretty dead the first few months of the new year. If you wanted a new expensive toy, chances are you picked it up for Christmas.

I doubt if MS are really to bothered if Sony price cut or not, they seem to have things under control and are selling big amounts of software and accessories and that is where the money is.

And the above + the smaller chip sets will probably mean MS have a price cut ready if needed, so as far as Sony are concerned a price cut could prove to be very counter productive especially as that could mean that MS respond by cutting the price of the arcade model to a level that would make even the PS2 look very expensive for it's out of date technology.

I think that we will only see a new price cut on MS game on the end of 2009 when the CPU+GPU integration comes (probably a slim version).

For prices I think:
Elite $ 349
Pro $ 249
Arcade $ 179, mabe 169

No mater what Sony does, xbox 360 will always be cheaper
Ps3: Cell + Blu Ray + Bluetooth + Wi Fi + Memory Cards + PsN Costs

I think that will drive Microsoft bankrupt, especially the 300 buck Elite. This will certainly get them a loss on each console sold.

I think their best bet would be to cut the pro and elite by around 30 bucks each, and keep the Arcade the same. It's reached the magic price.

It would be an epic win for Sony for the rest of the generation. That's simply because the cut would be huge and Sony would still have room for more cuts later. MS would surely try to make a cut, too, if the PS3 gained momentum. They, however, don't have very much room for cuts unless they plan to go below $100/€100.

Oh, and a cut to $2999/€299 is very unlikely to happen as they're losing money even now and the bad situation of global economy has made their losses even greater.

I talked to a Sony representative yesterday in a big store here in France. He confirmed me that it is very likely that Sony will release a PS3/Killzone2 pack in February (game sheduled for the 02.23 in the USA, 02.28 in Europe) for 299€. But he told me that they kept this information secret because it would affect the sales for this christmas, so I should not speak about it actually ^^

MS would wait and see what happens. MS is in the position where they do not need to react to Sony moves until they feel it is the right time. Really best case for Sony is to cut price early in 2009 and trim off about 1,000,000 from what looks like about an 8 million 360 lead. So like this year MS takes Sony blows and drops price around September next year and adjusts the size of the HDD to purchase the most cost effective HDD available at the time. As for Elite price the Elite does not cost $50 more to manufacturer over the Pro. Quick look on NewEgg.Com and the cost difference between a 60GB and 120GB drive is $10.

I don't see how that is a counter at all.  It will be the same price as a PS3 which has blu ray so PS3 would be by far the better value for money.  I am yet to see the benefit of having a substantial hard drive in 360.  Unlike the PS3 it is not as if you can just transfer your media files on to it (thank goodness i did not make the mistake of getting an elite instead of premium).  Only use is for people who download HD movies alot but those who would download over 120gb of movies are a very limited bunch (if such a bunch even exists). 

When it comes out, Microsoft should just bundle FFXIII with their 360s. :)