Sony is slashing the price of its PlayStation 3 games console by 17% or $100 in the US to boost sales.
While Sony is faring well in Japan, sales are lagging in the US
As a result the PS3 will now cost $500 (£249), between $100 and $200 more than versions of the Microsoft Xbox 360 and twice as much as the Nintendo Wii.
The Xbox 360 and Wii have been significantly outselling the Japanese firm's PS3 in the US market.
The news came as Microsoft said it would not be cutting the Japanese price of its Xbox to lift lacklustre sales.
Microsoft made the announcement a week after it said it was spending $1bn to repair problems with the Xbox 360.
The Xbox price tag of about 38,000 yen ($300) is "very competitive" and below that of the console's US price, Microsoft Japan's vice president said.
Xbox sales in Japan have been lagging behind those of rivals - Sony's Playstation 3 and Nintendo's Wii.
According to games magazine publisher Enterbrain, Microsoft has sold 122,565 Xbox consoles in Japan during the first six months of the year.
That compares with 1.78 million Nintendo Wii sales and 503,554 Sony PS3 sales.
However, it is a different story in the US market with Nintendo and Microsoft outselling their rival several times over
"Our initial expectation is that sales should double at a minimum," said Sony Entertainment America chief executive Jack Tretton.
"We've gotten our production issues behind us on the PlayStation 3, reaching a position to pass on the savings to consumers, and our attitude is the sooner the better."
The move also comes just ahead of the launch of the latest version of the PS3.
The new console will boast an improved 80-gigabyte hard drive and is expected to sell for around $600.
Sony Computer Entertainment Europe is expected to make an announcement at the E3 event - one of the biggest conferences in the game industry calendar - about the new console on Thursday.