I disagree, the market will set the price. The more demand for it there is the better it will get and the less that it will cost.
This is a little backwards. High demand = high prices. As of yet we still have limited information on what the actual demand is or will be, but early reports seem to indicate that demand is high. As a result, prices will probably not drop until/if Apple can manufacture enough to exceed demand at the current price. As long as they can put one on the shelf for $500 and expect it to sell, there's no reason to drop the price.
But it's also not fair to say that the iPad has no competition. Right now the competition seems pretty lackluster, but I expect that will change, too. It will depend on features, though, not the existence or absence of the word "iPad" stamped on the back. Brand recognition, loyalty, and prestige may carry Apple a long way, especially in the absence of strong competition, but once real competition starts, that's when Apple will have to react with pricing and/or feature changes. Early iPhones grabbed a huge market share because there was little in that arena that compared favourably to the iPhone. Now Android phones are creeping into that space as well. As a result we've also seen cheaper iPhones, and their feature set has continued to improve.
Also the amount of profit Apple is making per device is not only theoretical, but also of questionable relevance. One point is that Apple has invested a huge amount of money in Research and Development. Whatever they might make from an individual sale of an iPad, that is not pure profit until they offset their initial investment. But apart from any of that, high profits does not mean that Apple will lower the price. They will only lower the price if they can profit more by selling more units, which, again, will only be if customer demand is lower than their ability to produce units.
There is one situation I can think of where high demand
might lead to lower prices, and that is if Apple is making more profit from the sale of media/applications on the iPad than it is making from the actual sale of the device. In that situation it might make sense for Apple to lower their initial profits or even take a loss just to maximize the number of people buying media on their iPads. But that will take time, I expect, because for a lot of media, this is an untested revenue model. It does, however, seem to be a revenue stream Apple is becoming more and more comfortable tapping in to, so on-device purchasing could become a type of device subsidizing if Apple's supply exceeds its demand. But that will happen
after they've sold as many at a higher price point as they can.
I disagree with JSRinUK, in that I think competition will be a factor in the next few years. People will not remain hung up on the iPad/Apple name if something comes along that compares favourably. But I do agree with him and with kornchild2002 that prices are unlikely to drop in the immediate future. Like kornchild2002 says, Apple tends to compete more by increasing features for the same price point and then maybe dropping prices (but often just dropping production) of the lower capacity, less featured items. In my opinion whatever price drops Apple does offer tend to pale in comparison to the features it adds, i.e. they may give you last year's model cheaper, but you'll still want to pay extra for this year's model.
Assuming this thing sells well, and that remains to be seen, I would not expect any significant price drop any time soon, but I would expect that within a year we will see a doubling of the capacity of all models and the inclusion of a few extra features (like a camera) for about the same price. I do agree that the biggest wild-card is the 3G model. For a lot of people, the initial price jump will not justify the added functionality, but the cost of
using that functionality seems so low (compared to other data plans) that, if that use model is profitable, it will make sense bring the 3G model down closer to the wifi model or maybe even collapse them into one model.
