unlikely the wii cater to a different market, in fact it might get a boost do to nin releasing more machines to help combat it

Wii is popular, sells like a beast, there is high demand, 199$ Arcade wont change this trend. People that want Wii specifically wont get Xbox. 360 sales will go up, but wii wont change.

Let's apply some economic analysis.  The recent price cut of about 20% of the Xbox 360's price has caused 100% increases in sales.  That means that the Xbox has a fairly high degree of elasticity.  Let's think of things with low elasticity, stuff that sells well even if the price goes way up:  milk, gasoline, life-saving medicine.  These are the kind of things that have consistent demand because they are staples of life.  Something with very high elasticity means people are buying it because "it's so cheap I might as well."  Not exactly a winning strategy, especially when a company takes a loss on every machine sold.

Now let's think about the Wii's elasticity.  If Nintendo slashed the price of the Wii it wouldn't affect sales because the demand is already higher than the supply.  Yet we have seen Wii sales jump 200% in weeks where Nintedo fixed supply issues to coincide with the release of high profile games.  That means people aren't buying or refraining from buying Wiis because of pricing.

So what can we deduce from the comparison the two elasticities?

That the current jump in Xbox 360 sales will not cut into the Wii market at all, and the increases in Xbox 360 sales are a blip that will level off within 3 months after the holiday season, most likely to levels lower that how they were selling last week.

Wii sales are affected by Wii supply, not other consoles. At least for now.

I don't see it effecting Wii sales. PS3 on the other hand...

Is ok. You live for now ;)

I think it may take some WII sales due to supply constraint. When the Mom sees no WII and sees the 360 for $200.00 with five games (Arcade version) they may pick it up

 Every time someone says that, I read it as another joke than it is.

I read it "Sales will go the negative of down". Gramatically, that doesn't make any sense, but it sort of means it will go up.

Nope. Those that want a wii want a wii. Those that want a 360 want a 360. ps3 sales are the one's more likely to drop but even that isn't a given since the ps3 is steadily developing it's own must-have AAA titles. In the end, its all about the games the consumer wants to play.

What the price cut really does is make the 360 affordable for those who wanted a 360 but couldn't afford one. Nothing really changes for those who want the wii

It might nab a minimal amount of wii sales off the most price-conscious consumers.