If Microsoft dropped their prices, they'd have more, not less money.
Microsoft's refusal to budge on prices makes no sense. In an age of electronic entrepreneurship, when competition from Apple (who are admittedly much worse on lavish overpricing) and people prepared to produce fully-working products and distribute them for free, surely Microsoft's policy should be to open up the floodgates and allow people on any budget to buy into their corporate family. Evidence from digital distribution services shows that lower prices convince many more people to buy a product (Steam sales have even gone so far as products at half-price selling 32 times more copies), and given that software does not have a manufacturing cost per unit made, it's insane that they are willingly putting off so many customers.
In the end, it's probably just the strength of brand recognition and the lack of public knowledge that is carrying Microsoft. I'll probably buy Windows 7 because that brand alone allows me to play my collection of games. And the regular joes who have more pressing issues than to pay attention to technology will probably keep buying PowerPoint and Word because they're unaware of the free open-source alternatives. This doesn't seem like a particularly honest way to run a business. I make a point of buying games from BioWare and Valve because I admire their commitment to the customer. Microsoft on the other hand don't even bother to admire their customer's commitment to them.
