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The main problem is MS could just as easily cut 360's prices since it's been profittable for quite a while now and Nintendo could probably sell Wii's for $100 and be still be profitable at this point.

Also Wii appeals to a different audience than PS3's. Women is particular love Wii and there's nothing on PS3 (aside from Blu-ray) even with Move, to appeal to women/girls or the more casual crowd. At least nothing comparible to the vast (cheap!) library already on Wii.

All such a price cut would do in the end is lose Sony billions more.