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I think that the price cut will ultimately increase sales as well, just keep in mind that Sony's remake of the PSP will probably cause some delays in new games coming out for the new model, b/c game developers are going to have to figure out how to use the new machine and code for it.

 Also, keep in mind that this represents a reversal in sony's strategy of having the best quality products on the market, which b/c of pricing, has been bad for the company.  This might be an indication of the PS3's future remake if they can't eventually be bumped up.