Sony has sparked a video games console price war by cutting the cost of the PlayStation 3 in America by $100 (£50), or 17 per cent, after fierce competition from Microsoft and the Nintendo Wii.

PlayStation 3, complete with a 60-gigabyte hard drive and Bluray high-definition DVD player, will now cost $500 in the United States. This is $20 more than the Microsoft Xbox 360, but still double the cost of the bestselling Nintendo Wii.

It is understood that on Thursday the Japanese group will introduce a similar cut in Britain, where the PS3 costs £425.

The price reduction in the United States was scheduled to be announced this week during the annual E3 trade show in Santa Monica, California, but it leaked out early.

In America, both the Xbox 360 and the Wii are outselling the PS3 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 added: “We’ve gotten production issues behind us, reaching a position to pass on the savings to consumers.

“We’re especially proud that the PlayStation 3 has the lowest failure rate of any PlayStation product. It’s absolutely the gold standard.”

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

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