It is clearly evident now that pricing has very little to do demand. In fact more sales can happen even at inflated  prices if the demand is there. Seeing how the Wii and 360 are priced much above its predecessors and even have better sales than their predecessors we may be seeing a generation that refuses to have price cuts. Instead they may resort to the ipod model of just improving the older ones (Xbox elite) or have budget priced one (arcade).

i would be happy if nintendo decides to go the "improving older ones" route. if say nintendo decides to do a "trade-in" for older wiis for a black wii with 8Gb memory for an additional $100-$150, i may very well do it.

I anticipate that Nintendo will reduce the price of the Wii on a regular basis, but they're probably in no rush to do anything about it because no one has put any presure on them. In May/June of 2008 the Wii will (probably) see a $50 price reduction, and be a $200 console 18 months after it was released just like the PS2 was; from there it will (probably) drop to $180 in 2009, $150 in 2010, $120 in 2011 and finally $100 in 2012 ...

I can't see Microsoft keeping the price of their systems high since they've already said that the bulk of the original Xbox's sales (75%) happened after it reached the $199 price point.

@eugene

the wii is hardly priced "much above its predecessors". The N64 was $250, the GC was $200. With the Wii + Wii Sports at $250, that is comparable to the previous two consoles, and if we included inflation into the equation, then it is possibly too low.

Sure, it has been 1 year for the Wii, but how many consoles actually had a price cut within the first year? Also, why cut price when you can't possibly produce enough systems. On top of that, I doubt Nintendo will add anything other than a color change for the Wii, and even then that may never happen.

Microsoft on the other hand comes with their windows/office experience where they always have multiple levels of software with different pricing. Since their upper management has been trained that way we can expect similar marketing tactics in the gaming devision. However, since Microsoft is yet to be dominant like the PS1/2 or Wii currently looks to be, I don't really see this as becoming the norm over the course of 10-20 years.

Also, Since Microsoft doesn't see the Wii as competition, I can see, with the PS3 costing $600, why they waited to do a price cut. However, since Sony has gotten close to the XBox360 price, I can see normal price dropping starting to happen.

So no, I don't see this pricing as much more than a 1 generation experiment, where after the Wii dominates the market, and technology becomes cheaper, I expect the next batch of consoles to be in the $250-350 range with better performance than the PS3. With possibly only Microsoft running multiple SKUs

Actually the N64 cost $200 as well. ONOEZ the Wii costs $50 more! (And it has a pack-in game.)

What? Are you serious? See: PS3.

People want one, as is evident on the "most wanted " lists, it's just that nobody can afford it, or couldn't anyway at $600.