I have found in mzy area (Ab, Canada) that retailers have become a lot tougher, games disappear off the shelves instead of getting endkess discounts. I feel like Wii/ HD twins wass peak discount time...but maybe that is just here?
As for HW prices, I don't know if Nintendo, Sony or MS get lower "cuts" just because the games are discounted...seems unlikely. But true for first party sw, for sure. I wonder if Satoru Iwata has had anything to do with it? He noted that GameCube got only a small temporary boost fromthe 99 price cut, and I think he correctly identifiied that increasing value with great games is better than price cuts. Definitely influential on Nintendo pricing, maybe leaked over to the competition?
I live in the US and here I see software prices drop fast, especially at Gamestop. It's common now to see a new game go from $60 to $40 in about 3 months or so, and sometimes it gets down to $20 before the year is over. This is for PS4 and XB1 games. Nintendo games drop their prices much slower, especially the first party games.
I do think software has some influence over price cuts. In the past, home consoles would drop in price quickly while handhelds got fewer price cuts (and still do in fact). Handheld consoles have a lower tie ratio, so they can't afford to cut the price on a handheld device as much. They need to make a little money on the handheld hardware, because they aren't making as much on the software.
Another factor on hardware price, for Sony at least, could just be adjusting to the competition. When they released the PS1 and PS2, they were competing with Nintendo and Sega and making consoles of similar power (with Sony tending toward the weaker end). Sony didn't have the experience in making games at the time that these two established game companies had, but they had a lot more capital. The main way they could compete is keeping their hardware price low. This included frequent price cuts.
Nowadays, things are very different for Sony. Sega is gone from the hardware side, and Nintendo is intentionally making the weaker console. Instead Microsoft is the company with the deepest pockets and the least game making experience. So they need to make sure their game library is consistently better than Microsoft's, since hardware power is going to be similar. So now price cuts are less important for Sony, but investing in their first party lineup has become more important.