Very true.  Pricepoint can only go so far.  Too low of a price actually starts to communicate a lack of value in the product.  If a new product is too low of price, many consumers would psychologically refuse to purchase it just on the grounds that there "must be a reason" for the price to be so low, and again they would still have to be convinced of it's worth.  When a console is already on it's way out and there is no hype left, proving this to those few potential buyers, itself, holds no worth.

The dreaded $99 Gamecube effect...

One gen does not make a trend.  Besides, those were actually flawed results.  The PS4 launched 7 years after the PS3, while the PS3 was launched 6 years after the PS2.  If you add in the PS3's sales from 2012, that wold have made it closer to ~22M sales after the PS4 launched, pretty close to the PS1's sales.  Even if you want to say that the PS4 would have taken off maybe 2M off those sales, it still would have been ~20M.  It's safe to say the PS4 is going to do at least as well as the PS3 did in that scenerio.  So, by March 2018, we should be looking at ~78M-80M PS4's sold.  By March of 2019, probably ~94M-96M.  This should be the year the PS5 launches.  So, even if it only does ~20M from March 2019 til it is discontinued, probably in 2022/2023, that would put it at ~114M-116M.

Also, $199 is no myth.  It's just the product has to have appeal in the first place.  Just look at the XBO.  Even if that dropped to $199, while the PS4 stays ~$249, the XBO isn't going to magically start outselling it.  But, the PS4 has mass appeal.  So, once it hits $199 sales will at least stay steady, instead of a slow decline.  It's one of the reasons I think Sony is going to be on par with last years 20M.  Same thing happened to the PS's before it.  It just didn't help the PS3 because of how late it was in the gen, and because it didn't have quite the appeal as the PS1/PS2/PS4.  People were just ready for next gen.  Even a $149 price wouldn't have helped it much more. 

Yea, it doesn't sound good.  Though, I think maybe missing all of the system's this gen (PS4, XBO, and Wii U) may have taught them a lesson.  We'll have to see.  I think the $300 vs $200 is going to happen later this year, but just for the holidays.  If it becomes like that for next year, that is definitely not going to be good.

The $99 console is not the best option because it leaves little room for Retail store margins.

But availability of competing products should also be considered.

The $99 Gamecube didn't exist in a bubble, most people don't remember but the DVD capable PS2 was very cheap as well.

There were lots of price cuts that followed the initial cuts .

After the $99 price cut on the Gamecube the PS2 was on average only ~$51 more expensive.

The PS2 was also on average only ~$54 more expensive than the Gamecube throughout the Gamecube's lifespan.

After the $99 price the Gamecube ended up selling ~11.29 Million units WW total. 

After the $149 price the PS2 ended up selling ~82.49 Million units WW total, after the $129 price the PS2 ended up selling ~50.10 Million units WW total, after the $99 price or less the PS2 ended up selling ~17.80 Million units WW total.

It looks like PS4 will have the least and shortest legs of any PS console after being succeded! It needed the magic price of 199$, but PS buisness is more singificant than ever for sony, ergo profit comes first and owing to the fact that PS5 is sold at loss for the moment, PS4 was/is charged with offseting the losses. The lowest that PS4 1TB price could go without burning money was 249$ ( the same with PS3 excluding the 12gb version of it) , but more in order to match the legs of PS3 or outnumber them a bit and nothing spectacular.

Sorry I'm a few years late but here I Am the thread bump, knocked me out of bed to do this reply, Sony learnt by the MS situation and had the contract made so Nvidia had to pass on any manufacturing price drops to them.