Okay, this is purely speculation, but I think there might be something about this.

I think Sony want to compete directly with the iPod Touch and the iPhone, because they want to attract this audience. The PSP Go! isn't out to compete with Nintendo and the DS, the PSP 3000 is for that. By making the PSP Go! sell at a premium price, the people buying iPod Touches and the like will see the PSP Go! as a cheaper (but still cool) alternative, where as a $169 PSP Go! would have been swept away from this audience, because the price doesn't fit with what they are after.

This is where I think Sony are aiming with the PSP Go! and its pricing, and for competing with Nintendo and the DS, they have the much cheaper PSP-3000.

So, is this a clever tactic? Could be. If Sony manage to establish the PSP Go! with this audience (might I remind you that iPod Touches and iPhones sell very well at the moment), then I think it could really boost the PSP overall, and if they don't succeed all that well, then I still think they will have managed to create a profit. The profit margins on the PSP Go! are quite big after all.

Thoughts?

i think they just wanted to make money, a loss-lead strategy isn't going to work for them atm.

I really dont see the problem with the price, I dont see people complain about the ipod touch being $229

That's exactly what I am saying! Sony are trying to compete with Apple and the iPods here, whereas the PSP-3000 will continue to compete with Nintendo and the DS. The PSP Go! was never meant to appeal to the PSP-3000/DS segment of consumers, it's going for the iPod Touch market.

It seems one of the big reasons for the price is that retailers have a higher margin on the PSP GO. Understandable since they won't make profit from its software.

Anyway, I think you're right that this price is for the gadget and gaming enthusiasts to pick up. The price will probably go down pretty quickly, as happened with the iPhone, PS3 and some other products which were initially high-priced.

Well, yes to a degree.
The main reason is that at that price it will be very profitable for Sony, very profitable.

Off topic: Its truly mind boggling to be in a world where high price is a sought after feature in a commodity.

On-topic: To do that Sony has to provide a suite of software utilities in addition to games. Stuff like 3rd party and user generated apps, pdf readers, music players, an open SDK that anybody can use to program apps. I doubt if Sony has the sophisticated software expertise to develop all that.

Yeah, I know retailers will be given a bigger cut, but I don't think that's the primary reason for the price. I think Sony could have priced it at $200, have happy retailers and still make a small profit for themselves if that's what they wanted to.

Yes, but Im almost certain that Sony will make more money pricing the system at $249 rather than $200.

At launch, tech inthusiasts won't really care about a difference of $49 and will buy the system regardless, making Sony alot of mooney. If price ever really negatively effects the PSP Go's sales, then there is plenty of room for Sony to cut the price....and still be making profit

Thank you Captain Obvious

The point isn't that Sony are selling it at great profit (yes, I'm sure Sony are happy about that), the point is that Sony are trying to penetrate a new market for the PSP, and if it isn't at the right price point, then it will go unnoticed by the audience the PSP Go! is targetting.