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Considering the cost of a touch screen in 2005, it could have made the PSP prohibitively expensive unless the specs were downgraded. I mean, the PSP could have cost $300 with a touchscreen, twice of the cost of a DS. If anything, I'd imagine that hurting sales.

As for switching the touch screens, that hurts both Nintendo and Sony imo. Nintendo would be left with a pointless second screen when they could have focused on power while Sony's system would cost over twice as much as its competitor.