Microsoft is to cut the UK price of its Xbox 360 Elite gaming console by £30 to £199.99 and by $100 to $299 in the US.
It comes in the wake of Sony's decision to drop the price of its PlayStation 3 to £249 in the UK and $299 in the US.
The price of Xbox's entry-level model the Arcade will rise to £159.99 from £129.99 - although its US cost remains the same at $199.
The Xbox Pro mid-range model will be discontinued altogether. A new version of PlayStation 3 is out next week.
Recent figures suggest that overall sales of both games and consoles have slumped this year - with a drop of some 29% in the US.
However, Xbox sales are the only console in positive growth in the US this year, rising by 17%.
The new prices will come into effect on Friday, ahead of the release of the recently announced slimmed-down PlayStation 3. Its hard drive size has been increased to 120GB hard drive - the same as the Xbox 360 Elite.
"Price cuts are always a good thing," said Nik Williams, a gamer from Haselmere in Surrey.
"Obviously, Sony are worried by lowering its prices in the first place but for me Xbox has got the bigger games library, the better games and I just think it's a better console."
Others were less impressed, citing PlayStation's free online gaming and ability to play Blu-Ray discs.
"The Xbox price cut would never persuade me to get one," said Anthony Charles from east London.
"The reason I'm a PS3 man all the way is because you get all the brilliant games - and then the little extras."
It comes in the wake of Sony's decision to drop the price of its PlayStation 3 to £249 in the UK and $299 in the US.
The price of Xbox's entry-level model the Arcade will rise to £159.99 from £129.99 - although its US cost remains the same at $199.
The Xbox Pro mid-range model will be discontinued altogether. A new version of PlayStation 3 is out next week.
Recent figures suggest that overall sales of both games and consoles have slumped this year - with a drop of some 29% in the US.
However, Xbox sales are the only console in positive growth in the US this year, rising by 17%.
The new prices will come into effect on Friday, ahead of the release of the recently announced slimmed-down PlayStation 3. Its hard drive size has been increased to 120GB hard drive - the same as the Xbox 360 Elite.
"Price cuts are always a good thing," said Nik Williams, a gamer from Haselmere in Surrey.
"Obviously, Sony are worried by lowering its prices in the first place but for me Xbox has got the bigger games library, the better games and I just think it's a better console."
Others were less impressed, citing PlayStation's free online gaming and ability to play Blu-Ray discs.
"The Xbox price cut would never persuade me to get one," said Anthony Charles from east London.
"The reason I'm a PS3 man all the way is because you get all the brilliant games - and then the little extras."
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