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The price cut is already effective — just check out any online retailer like Gamestop or Amazon and you'll see the device selling at its new price point.
It's a welcome change, and it makes the device more competitive with the Nintendo DSi ($149) and the iPod touch ($229 - $399). Given the capabilities of the device, $199 seems like the perfect price point. The PSP targets the core gamer market, which is willing to pay a little bit more for impressive graphics than it would get on the DSi. Still, neither device is as dynamic as the iPod touch.