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Intrinsic on 26 October 2014
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Shadow1980 said:

Europe serves as a test case for massively undercutting the competition in terms of pricing. It took MS dropping the standard 60GB 360 SKU to £169/€239 over the course of three price cuts just to make it remotely competitive to the PS3 in Europe. When the 360 was reduced to that price, the PS3 cost £299/€399, thus making the 60GB 360 less than 60% the PS3's then-current price.

So, if MS was able to similarly undercut the PS4 by dropping the XBO to $250/£220/€250, it would boost sales considerably. However, there's some obstacles to that. First off, there would probably be a lot of opposition from within MS themselves to such a massive price cut. Xbox has been such a money sink for them that I think an extreme price cut (we're talking a 37.5% price cut, which would be one of the biggest individual price cuts ever) would not be well received by investors. The biggest price drop I can see happening is to $300/£260/€300. This would provide a good boost as well. Of course, this will probably not close the gap with the PS4 in the U.S., nor will it make it a major sales presence in continental Europe. It might only provide a 50% boost to baseline sales at most. The reason why it won't close the gap in the U.S. is because I expect that if MS issues a price cut first, Sony will immediately answer back with one of their own.

I think the most likely scenario is that the PS4 and XBO retain price parity with each other throughout the entire generation. Both systems should get good boosts from a 25% reduction in price next year, but proportionally I think their sales will remain about the same.

EDIT: I see that this thread was created back in March and ethomaz was thinking of MS dropping the original XBO+Kinect SKU to $350. I missed that. Well, I still stand by my argument that we won't be seeing MS massively undercutting Sony, and that any price cuts they issues will be answered immediately and proportionally by Sony, thus maintaining price parity for the whole generation.

MS has two problems when it comes to cutting their price. First, unlike the PS360 gen, sony could never really cut their price by much cause the console remained too expensive to make throughout the course of the generation. So MS could always be "cheaper" than the PS3. This gen is not like that. The PS4 was making a profit on each box sold from day one (more or less) and that profit s growing. So as you said, sony is more in a position to match any price cut that MS does.

Second issue is that a price cut won't really work in their avour with the PS4 selling so well. If the XB1 is averaging 250k sales per month and the PS4 is averaging 500K a month, even while technically being more expensive than an XB1 now. Forcing sonys hand and making them drop the price to $300 just to match them would only mean that the sales of the PS4 will accelerate. Putting sony in a position where they are selling around 750k-1M per month while MS sells 350k-500k. so instead of the gap growing by only 250k each month you now have a situation wher eits growing by 500k. Thats all round bad for MS.