Sony has sparked a video games console price war by slashing the cost of the PlayStation 3 in the United States by $100 (£48) or 17 per cent after fierce competition from Microsoft and the Nintendo Wii.

The PlayStation 3, which comes complete with a 60-gigabyte hard drive and Blu-ray high-definition DVD player, will now cost $500 in the US.

This is only $20 more than Microsoft Xbox 360 but still double the cost of the top-selling Nintendo Wii.

It is understood that the Japanese group will introduce a similar cut in the UK, where the PS3 costs £425, later this week.

A spokesman for Sony UK said: “There will be an announcement about PS3 and value for the consumer on Thursday.”

The price reduction in the US was due to be announced later this week during the industry’s annual E3 trade show in Santa Monica, California but leaked out early.

Both the Microsoft Xbox 360 and Nintendo are outselling the PS3 in the US several times over despite its popularity elsewhere in the world.

Jack Tretton, the chief executive of Sony Computer Entertainment America, said that he expected the price cut to double sales “at a minimum”.

He said: “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.

“We’re especially proud of the fact that the PlayStation 3 has the lowest failure rate of any PlayStation product.

“It’s absolutely the gold standard.”

The move comes just over a year after Sony was forced to delay the launch of the console by six months because of technical hitches linked to the Blu-ray disc drive.

The European launch was then put back a further six months, until March this year, due to production problems cutting supplies.

Industry experts had widely expected the price cut despite comments last week from Ryoji Chubachi, Sony's president, that there were no immediate plans for such a move.

Analysts believe that it is more likely that the cut will push sales up by about 50 per cent to 120,000 units a month.

Sony is also introducing a new more expensive version of the PS3 featuring an 80-gigabyte hard-drive, priced at $600. It is being aimed at gamers who download material from Sony's fast-growing online network.

Microsoft is predicted to respond with price cuts of its own this week. It has ruled out a move in Japan.

Sony launched its first PlayStation in Japan in 1994, breaking the dominance enjoyed at the time by Sega and Nintendo.

To date, more than 50 million PlayStation consoles have been sold worldwide.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive