Have to also keep in mind the price of the mini vs full sized ipad... it's not just dropping $20 (well, $30) per mini sold... there's a lot of nuance in the pricing and consumer perception of the cost vs value of mini vs other products (including full sized iPad...)
My sense is, and it's just my sense, is that they priced it more with cannabalization or the larger iPad's in mind and less with the competition in mind. If they had come in around $249 to $279 they could have still sent all the right signals about this being superior to the competition. However, at that price point they would have really impacted their $499 iPad. I believe Apple left a big hole for competition to thrive in because of the fear of impacting the larger iPad. Two reasons: Apple admits that the main usage for a tablet is surfing the web and checking email. A Nexus 7 does that just fine. Secondly, Nexus 7 will improve significantly from the 1st gen it is - Apple's given them plenty of breathing room to bump the specs and sell a higher end device at $299 and even $329 price. Apple had a difficult job but I sense they acted like the large incumbent they are and worried about their own shorter term margins and less on snuffing out the competition.
