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But apples and oranges -are- in competition. I only need one piece of fruit with lunch.

The Wii isn't competing with the PS3 and 360 by trying to offer a similar product for less, but by accomplishing the same ends in different ways. Ford competes with Toyota by offering similar products. However, it's obvious that the advent of personal teleporters would cut into the demand for both. It doesn't have wheels or an engine, but a teleporter accomplishes the same goal (getting you to work) more efficiently, so you'd buy one instead of a new car.

Sure, we might see more two-console homes this generation than last generation, but they're going to make up a tiny fraction of the market. It doesn't particularly matter that the Wii doesn't have exactly the same games as the other two consoles - different titles remain highly substitutable.