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Is it more important for MS to beat Sony, or to lose less money on consoles?

The obvious answer is the latter. They don't REALLY need a price cut do they? Xbox numbers might be less than PS3, but it's still healthy. It's going to take a hell of a lot to convince the higher-ups to drop the price if that will only mean less profit and not much else.

But you're right - people love cheap consoles.