It is called "consumer surplus" and its foolish for companies to give it away. Companies wanting to maximize profits should set prices to match demand. They should NOT cut prices until demand falls because that means giving away potential profits. It has also been noted that trying to compete on price only drives the prices (and profits) down.

Even though this behavior is bad for companies, they seem to be dong it. Is this stupidity or does it reflect a change, ie compression, of the business cycle where technology products cut prices so fast its hard to recoup the investment?

On the good side, I hope that the existence of more flat-panel TV's puts market pressure on TV broadcasters to improve the HDTV offerings.

Wave of Price Cutting Hits Flat-Panel TV Sets

Sales Are Seen Doubling, But Aggressive Marketing Could Shrink Profit Cycle

By EVAN RAMSTAD in Hong Kong and PHRED DVORAK in Tokyo Staff Reporters of THE WALL STREET JOURNAL

December 29, 2005

Even as flat-panel television sets come into their own, manufacturers and retailers are cutting prices, leaving some to wonder if they are giving away the store.

While great for consumers, the price cuts are a mixed blessing for TV makers and sellers. Electronics products typically enjoy the biggest profit margins early in their life cycle, the stage flat-panel TVs are in now. Price cuts improve sales volume, but they also shorten that period of high profits. Some manufacturing executives believe prices may be falling too fast, and they are starting to point fingers, though it is difficult to say who started it.

"Manufacturers we compete with took an early position of cutting prices on LCD, and very specifically on plasma, at a time when there was no need to do it. Demand was up. Supply was up," says Peter Weedfald, senior vice president for sales and marketing at Samsung Electronics America Inc., the U.S. division of Samsung. "No one was happy with those moves."

In addition to eroding profits, the risk of fast price cuts is that demand will outpace supply and manufacturers will leave money on the table.