Wii Warm Up: When's the right time to drop price?

Yesterday's story about Iwata and his love for money (he is a businessman, after all) got us to thinking about when a price cut is justified. Do you believe that one should use price cuts to stay competitive with competition, much like Sony was forced to do with the PS3 this generation?

Or, do you fall more in line with the traditional drop over a predetermined amount of time? When is the time right for a hardware price drop? Do you think manufacturers are obligated to pass the savings that come from making the product over its lifespan on to the consumers?