Its not a 2 way relationship between the Xbox 360 and the PS3 theres the Wii as well.
If Someone buys an Xbox 360 instead of a Wii
- The HD gaming market expands so that entices more developers to develop for HD systems.
- Sony doesn't lose a customer
- Sony wins a little.
If someone buys an Xbox 360 instead of a PS3
- The HD gaming market expands, so that entices more developers to work on the HD systems
- Sony loses a customer so therefore loses some potential revenue especially from 1st party software
- Sony loses moderately.
If someone buys a Wii instead of a PS3/360
- The HD market doesn't expand, the Wii market does and that attracts developers away from HD development
- Sony loses a customer so therefore loses some potential 1st party sales
- Both Sony and Microsoft lose the greatest.
So based on this you could say that Sony would be winning and losing at the same time. They want the HD market to expand but not at their own expense, so I bet they would rather someone buys a 360 instead of a Wii rather than have it canibalising their own sales. But even if they do lose potential sales its better that the Xbox 360 gets them than the Wii.
Sony is gaining from these price cuts - anything that could possibly keep the Wii from gaining tracting with developers for a little bit longer is going to give them more time to find their feet and cut the price.
Sony is losing from these price cuts because an Xbox 360 sold is a PS3 not sold. So they lose out on potential customers. There will be substitution, even if the Xbox 360 is considered an "Inferior" product like say margarine is to butter, if the price of margarine goes down there will be fewer sales of butter as they both do essentially the same thing.
Tease.
