Microsoft plans to be generous with the pricing of the new Xbox 360 when it is releases, and has committed to slashing the price of its next-gen console, even creating a roadmap for doing so. A price cut a year is planned for the console.

Demand for consoles drops during their lifetime anyway, forcing price cuts in order to shift boxes but for Microsoft cuts will mean that it can further increase the margins between its console and Sony’s expectantly pricey offering.
Expect very strong competition and aggressive price slashing between the next generation consoles, not to mention the odd dirty trick or two.