You assume that people could only want one or the other. Or that there aren't people out there that want a ps3 in addition to those that want a Wii. Many people could want both a Wii and a ps3, but choose the Wii because it's much cheaper and still offers great games. There could also be people out there that only want a ps3, and can't justify the purchase at its current price point.
I agree with your premise, but you come to the wrong conclusions Well, the conclusions aren't necessarily wrong, but we don't know that they're right either.
The ps3 is very expensive for a game console, and many people aren't willing to pay that much for a piece of entertainment equipment. Using sqrl's values vs value comparison, the ps3 has many positive values, but at its price it isn't very valuable to many people. Drop the price, and its value increases. Sales of the ps3 grew enormously when a $399 unit was released. How high would sales be if the unit was priced $249.99? Certainly much higher than they are now.
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