If you go check PS3’s out on Ebay you will find that new ones will consistently sell for around $500, or if they are sold with extras they are bringing around $100+ below what they do at retail.

This is not good for the argument that a PS3 price drop will help sales. Granted any price drop will help increase sales a little for a short time. But if the demand isn’t there to drive the price up for new PS3’s to above $500 on a massive market like Ebay. Why would a $100 price drop help much?

If anybody is waiting on that $100 price drop to buy a new PS3 all they have to do is go to Ebay and buy one now.

Many people dont want to buy from eBay as they dont really trust it for the larger purchases

They need to lower the price to $400-500. Start competing with the 360.

 I prefer not to spend that much money on Ebay for an item since there are many "less than honest" people that sell on there.   Not to mention there are the greedy people who will charge $40-80 for shipping on those items to help them make a larger profit, or not to lose that much money.

Don't forget shipping charges. Don't forget custom charges. Don't forget that the PS3s that sell for that amount could have been sold by scam artists. Don't forget that when sellers end their listings early, and you look at the list of completed search results, it would appear that the item sold for the amount it remained just before the auction got cancelled. Don't forget that sometimes, if the item sold for too low, the seller may refuse to ship the item, and just relist it. Don't forget that the PS3 could be used. Don't forget that the PS3 could be broken. Don't forget that the PS3 could be 20 GB. Don't forget that the amount could be in U.K Pounds, Euros, or another currency, better than that of the U.S. dollar, or Canadian dollar.

This is a case where the users are a little disconnected from economic reality. No one would argue that a 100-200 dollar price drop wouldn't help sales: absolutely, it would. The problem is that they'd be bleeding money in the process.

Simple truth: if Sony did drop the price even further (and thus increasing their losses per console), they'd need to sell 2-3 more games per console sold just to break even. I am honestly curious how you suggest they do this, especially considering the current GPS (Games per system) is actually quite low for the PS3: considerably below that of either the Xbox360 or the Wii.

Here's an exaggerated example to clarify the point: what if Corvette dropped the price of all its cars to 1 dollar tomorrow. They would, in less than a week, control somewhere around 90 percent of the entire automobile market. They would also be laughably and completely bankrupt. 

Actually, with how rapidly they are dropping the price on blu-ray drives they wouldn't be losing more. They are already losing less than they were at launch, swap out the emotion enegine and a couple other things to go with the lowered price of BR drives and they could afford a $100 pricecut for Christmas in all likliehood. Will they? Who knows. Can they? Certainly.

I do think there is some potential backlash to lowering their price this early, it could look like a product in danger, and if the market gets that picture it could turn off the customer base. I could picture a conversation in my local gamestop. "Yeah they dropped the ps3's by a 100 bucks." "Wow, I could afford in now! I'm surprised that happened so fast." -potential customer. "Yeah of course they dropped the price, because no one is buying it. Soon they'll move all the exclusives to the 360, and they'll be no reason to buy it, the price drop was a desperate attempt to stay in business!" - the nutty customer that practically lives in the store.

sony, sony... is it to early to say that they've really fucked everything up this time?

 Oh absolutely, I'm not suggesting that price drops aren't reasonable as manufacturing costs go down, and I wasn't intending to refer  to those comments. Instead, I'm referring to the good number of people (some of whom posted in this thread) who simply suggest that Sony should dramatically drop the price right now, regardless of what that might mean for profits. Your point synergizes perfectly with mine: this is a real world where manufacturing costs, revenue and corporate profits matter. You can't drop the price -- again, regardless of economic terms -- just to gain marketshare without serious consequences. The Corvette example I gave was supposed to illustrate that.