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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respond by cutting the price of the arcade model to a level that would make even the PS2 look very expensive for it's out of date technology.