Xbox Price Drop

Microsoft have cut the price of their 20 gigabyte model by 80 euros dropping the price not to a nice low 270 euros, good news for people who were thinking of buying one, bad news for people who have already bought them. In the U.K the price of the Xbox has fallen by £40, but what does this dropping mean? With this drop in price Xbox are now undercutting its competitors (PS3 and Nintendo Wii). To me this shows they value their product as a luxury good that’s Price elastic, so by dropping the price they hope to gain a greater amount of sales. Xbox says they have reduced the amount as it is “the price point where a console’s audience begins to expand” but we both know its because Sony and the Wii are stealing the floor under their feet.