That's what you think, but you're wrong.

i dont think they would do that

 Well, they are smarter than you.

Wow that's quite a ban fine!

Supply Side economics is a funny thing. "If I only provide 5 diamond coated butt plugs, the demand will be astronomical! But... I'll only sell 5?".

But that's the joy of economics. You can get a PHD in economics to say anything, and that's why politicians love them.

Supply Constraints - They work on low-medium demand, high price items. Those who really want it, will pay for it.
The Nintendo Wii - High demand, high price. (Profit margin is almost as high as the profit margin on crack cocaine). The only value in Self constraining is... well, to make jackasses say it's intentional for the comedy of others I suppose.

Hey, if I'm wrong, well, at least I've got... well, nothing, but the capacity to admit I'm wrong.

Yes, they're smarter. Which is why they wouldn't want to lose billions of dollars just to keep their "hot item" image through the holidays.

If Nintendo was losing money on every console, that strategy would make sense. It would keep demand up until costs were down and they could start cranking out units like crazy. Of course, this isn't the case with the Wii.

Nintendo is a very conservative company; they don't want to ramp production too far past demand and it's apparent that they were unsure exactly how the Wii demand would hold up over the long run.

Expect 2008 to be considerably different as Nintendo cranks out 20m+ consoles.

nintendo has tripled production; they can't just hit a button and turn on more factories

and the demand for the wii may be over 100 million...nobody knows...they sold 20 million wiis in 14 months...it's not like they sold 10 million and were sold out...

also, there were plenty of gamecubes on the shelves the past few years

Do you really think factories popup overnight?  It takes time and resources to committ more factories and warehouses to handle such an increase/decrease in supply.  Before Wii launched ppl already wrote it off so Nintendo didn't want to waste excess stock by manufacturing tons of Wiis early that wouldn't sell till later since as the process goes along it becomes cheaper.

Hypothetical:

It cost em $230 to make a Wii at launch

It will cost them $170 to make a Wii 2 years from now

Clearly it would be in their best financial interest not to produce 40 million excess Wiis that wouldn't sell till later if they could be made cheaper later down the road anyway not to mention the cost of storage.

Nintendo already increased production earlier and it still wasn't enough.  Undoubtedly before the year is done they will increase again but it is very impractical for you to expect them to be able to produce 6 million Wiis a month starting February. 

 It really cost them $230 to make a Wii one year ago? Somehow I always thought it was considerably less than that...

Hehe I used the word "HYPOTHETICAL"

Those were all made up numbers used to explain the concept to him. I have no idea what it cost or does cost to make a Wii.