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The biggest problem with resorting to a drastic price cut in an attempt to undercut the PS4 is that Sony is all but likely to have their figurative finger on the button to price match the same day any price drop becomes effective.

It's a given that SCE designers and engineers are well on their way to both minor hardware revisions as well as the inevitable complete redesign with the interest in mind of reducing the BoM as soon as possible. So it won't be an imaginary scenario in which MS can afford to cut losses on each unit sold and SCE can't. They can and they will in good time. If they have to do so a bit ahead of schedule, they probably will.

At that point the question becomes a fairly pointless "so does the Xbox One have more value at $299 than a $299 PS4?" Nothing would be changed although consumers would be happy to get the $100 discount and sales would increase for both consoles.

The best course of action for the XBO will be the same course of action MS has taken for the last 3 odd years: offer holiday bundles by adding free games to increase perceived value without resorting to any permanent price cuts.

The concept must have been considered successful, given that SCE started doing the same thing for the holidays.