Great Aritcle by the Undercover Economist

There are currently massive shortages of Xbox 360 systems. Microsoft has priced the system at $300, but it is selling on ebay for up to $700. Why did Microsoft not price the system much higher? This situation isn't unique to Microsoft. Every single year shoppers seem to be frustrated by shortages of the latest "it" item.

Tim Harford provides a plausible non-answer in a column over at The Slate. He takes Microsoft at its word when it says it missed judged demand and is probably sorry for doing so. This explanation assumes that Microsoft determined the price long before launch and has difficulty changing that price once it is set.

I would be interested in knowing how companies go about pricing such a product.