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This quote from Wikipedia answers alot. Just replace GC with Wii,

"Yamauchi also wanted the machine to be the least expensive available of its kind, in his belief that people "do not play with the game machine itself. They play with the software, and they are forced to purchase a game machine in order to use the software. Therefore the price of the machine should be as cheap as possible." Nintendo hence priced the GameCube significantly less expensive than its rivals in the market, although the console's games were priced identically to those designed for the competing systems."

 

http://en.wikipedia.org/wiki/Hiroshi_Yamauchi