Especially in this economy. Demand for gaming is at an all time high. You can see it with the PS4 Pro as an example and that is being sold over $500 by some sellers and it is out of stock at its retail price in a number of places.
As Sony is a business, they could take advantage of current situation and start selling these consoles at a large profit if they wanted to as well to make up for the PS3 hardware losses ($599.99 price was actually a factor that allowed Sony to compete that generation, problem was rather it costing maybe over $800 to produce initially as well as the really high R&D costs and delaying of launch). Wouldn't blame them as they've got the new hot property in time for holiday season so even $50 to $100 higher than prices I mentioned earlier, I think it has a good chance of selling out really quickly. Kind of crazy that we almost expect them to sell such a desirable device at cost or even a loss when most other consumer devices have high mark-ups that aren't anywhere near as desirable and unique.
Sony's new smartphone is retailing at $1,199.99 and it will be out of date within a year so PS5 even at $699 would be seen as a performance bargain compared to PCs and smartphones. I don't see a problem for a groundbreaking console like PS5 trying to sell at least at cost or at a reasonable profit if they wanted to. Apple got a lot of competition yet they can make so much money on hardware and software still. PS5 has so many unique selling points over the competition this time around so puts them firmly still in the driving seat as long as they don't take the piss too much. Being even $50 or $100 more than a Series X would still be reasonable although it might help the competition gain more share than they would have otherwise and risk losing more on software in the long run. Regardless, I think it will be first home console platform to break 200 million sales.
Demand to try out the new controller feedback, try out true next-gen games, hear the audio difference and interact with the new UI and games at such fast speed will be such wow factors that will get even non-gamers interested to try and experience especially if they have a lot of time to still pass. For gamers, eradicating so many frustrating elements of gaming and heightening immersion will drive a new level of engagement.
Sony have been so kind these last couple of generations especially subsidising PS3 cost massively (PS5 probably could have been 20 Teraflops, 32GB Ram, and 16 Core CPU at similar PS3 launch hardware costs) and also selling PS4 at the price they did when they could have risen price by $50 or $100 given the strong performance of the console relative to its price point at the time which would have lead to them not having to eat the development costs so much and lead to a profitable launch year instead of a loss. They even gave away recently some decent games for free. Personally I hope they price PS5 as keen as £449.99 or even keener as I don't have any shares in Sony. I just hope I can get one for launch whatever the retail price may be, sure beats what the scalping prices are going to be!