We have all heard this argument a dozen times by now.. "If the PS3 were $299 and the Wii were $499...." , "If the 360 was $249....", etc....

But really how relevant is any of that?  The answer, as you may of guessed by my title, is 100% undeniably that this line of reasoning is complete and utter BS. To give it further consideration than that is only encouraging its utter stupidity.  Strong words I know, and I am not aiming them at the people aspousing the idea but the the idea itself.  In fact the point of this thread is to educate this poor souls who have allowed themselves to fall into this trap.

So, there are of course some very obvious and very logical reasons for all of this....  So lets examine them shall we?

1. "XXX Console" sells for its current price based largely on the price it cost to create it.  The cost to create it is entirely based on the cost of its components.  Newer faster components are more expensive slower older components are less expensive.  This is a trade-off you must deal with.
2. "XXX Console" has other considerations for its price such as overall affordability, and consumer value.  If it is not affordable than people will be unwilling to buy it unless they are absolutely sure it is what they want which in effect lowers your market penetration.  If the consumer value is not high relative to the affordability you will get less people who are sure they want it, which also lowers market penetration.
3. If "XXX Console" were to cost less the company selling it needs to be ready for one of two things.   A) Either they need to lower the technology and thus their production cost; -OR- B) They need to be willing to take the losses.
4. Companies want to avoid selling their console at a loss if possible but are willing to do so if they feel it is required to keep the consumer value balanced with the affordability of the console at its earliest price points.   This means that they also must be able to attain a profitable position within the window they have determined they can sustain the losses.
5. When selling a console at a loss you want to find the price that causes you to lose the least amount of money but accomplishes your objectives, whatever they may be.  If you feel the loss incurred gives you a a great deal of risk either financially or in terms of accomplishing your mission critical objectives then you need to reconsider your overall design.
6. If your console has no attainable affordability and value balance within the bounds of your comfortable losses than you have overstepped the technology boundry that is commonly referred to as "the best bang for your buck".  In this case you need to reconsider your overall design.

So it should hopefully be obvious that the situation is the way it is for a very good reason.  And if the prices were different then so too would the very consoles themselves.  Things are not this way by fluke and Sony doesn't decide to charge $600 dollars for a cheap system but a powerful one the same was Nintendo doesn't undercharge for a powerhouse system but an affordable one.  All of these factors have a complex relationship and ultimately shape the console and its price. 

PS -Please Bookmark/copy/past this thread and link it as a responce to anyone who utilizes this argument in the future.  And also please add anything I forgot or missed, I am about to start a class so I can't add more now, but I might later.

This is deceptive.

You are answering the question "Why is ABC console not XYZ price?" not "Would the public buy ABC console at XYZ price" as your title would seem to indicate.

If one could realistically get the value of the PS3 for $299 dollars and the value of the Wii for only $499, the most likely outcome should be obvious. That this situation is not possible (or at least highly unlikely) due to a number of factors is irrelevant to this argument.

I agree that it is not relevant, but not that it is BS.

All of that is entirely irrelevant. Plain and simple. Yes, in the real world Sony has to worry about the bottom line. When people speculate how different things would be if the prices were different you, by the very concept, must take out the real world component. Real world logistical concerns are exactly the thing "what if..." statements seek to avoid.

Really, you're arguing about what color the apples are when other people are trying to consider their potential sizes. Your argument has no relevance to what you're fighitng against whatsoever.