Before they had a huge edge in perceived value. Now it is a marginal edge. While a 50 dollar cut hurts profit now, it could be a knockout punch which would lead to much higher profits that the 50 they lost now. It does not matter if the PS4 is selling well now the lost opportunity profits MS could get back may be a huge dollar figure over 5 years.
End of 2009 Predictions (Set, January 1st 2009)
Wii- 72 million 3rd Year Peak, better slate of releases
360- 37 million Should trend down slightly after 3rd year peak
PS3- 29 million Sales should pick up next year, 3rd year peak and price cut