"The answer is yes, if you're asking, 'Are these the prices we're going with this Christmas?'" Hirai told the Financial Times. "When you really compare apples to apples, then I think we have a very good value proposition."

Blu-ray Drives PS3 Price Point

From Hirai's comments, it's clear he thinks the PlayStation 3's ability to play high-resolution Blu-ray DVDs outweighs the sub-$200 price of Microsoft's Xbox 360 Arcade, which lacks a hard drive and can only play standard DVDs.

A more accurate comparison, in his view, would be between the basic model of the PS3, which retails for $399, and either the Xbox 360 ($299) or the Xbox 360 Elite ($399). However, none of the Xbox 360 consoles can play high-definition movies, as Microsoft has discontinued support for the HD-DVD format.

Sony clearly is hoping the release of Blu-ray versions of popular Hollywood titles, such as last summer's "Iron Man," will give game consumers another reason to buy the higher-priced PS3. In addition, Sony has chosen to enhance the PS3's value instead of lowering prices by replacing the standard 40GB hard drive with an 80GB unit and a free game.

The wild card in this, of course, is how the global economic turmoil affects holiday sales. Like most gaming-industry executives, Hirai thinks the video-game industry will not be as affected by the downturn as other sectors of the economy.

PS3 Already Losing Ground to Xbox

What makes the Sony decision particularly bold is that sales of the PS3 are already trailing the Xbox in the fight for second place in the console wars. Nintendo, maker of the popular Wii, has been firmly lodged in first place for the past year and shows little sign of slowing.

According to figures provided by David Riley, an analyst with the NPD Group, Microsoft sold 195,200 Xbox 360 consoles in the United States in August, while Sony sold 185,400 PS3s. Both figures were less than half the Wii's 453,000 units.

Final figures for September won't be available from the NPD Group for a couple of days, but already reports are circulating that not only has the Xbox 360 expanded its U.S. sales lead, but actually is outselling the PS3 in Japan. If confirmed, that wold represent a remarkable consumer shift in Sony's backyard and could compel the manufacturer to reconsider its pricing policy.