Well, competition, first and foremost. I don't see why anyone would even attempt to downplay that factor. It's probably part of the reason Nintendo never really tried to form an equitable partnership with third-parties across the board the way others have. Nintendo's consoles are primarily intended to push their own software.
More than that, though, they've conditioned their fans to accept it. Once that happens, many of those fans will defend the practice.
As for why others drop their prices, that's pretty simple. The people who aren't trying your game at $60 might try it if it's at $40. Those that aren't trying it at $40 might try it at $20. When there is a lot of competition, this is viable way to increase exposure. Selling cheaply is better than not selling at all. Software isn't like a physical product where most of the investment is in the production materials.
More importantly, getting someone to try your game at $20 might turn them into a fan, meaning they might buy your NEXT game at $60. It's an especially smart move when you're talking about a continuing franchise.