WARNING: Some math and assumptions. I've been working on the budgets and forecasts for my company over the weekend and so I was in the mood for something in this vein.
So everyone is together up until this point, we're all mostly on the same page and agree. Many, though, argue that Nintendo needs to further cut the price on the Wii U, and this is where we split. Even if Nintendo spurred the growth of Wii U's install base at the cost of per unit losses, that's still a losing strategy for Nintendo
So, how much price drop are we talking? Nintendo goes super aggressive and cuts the price another $100, pricing the basic model at $200 and the deluxe (packed with a game) at $250?
So, if Nintendo cut Wii U's price $100 prior to the holiday, each Wii U sold at that price would almost certainly be a net loss for Nintendo, even over the entire course of the generation. At the average attach rate of 6.65 units/console, Nintendo would likely never make this money back. The argument in favor of price cuts is generally "it increases install base" but the point of increasing the install base is to sell them games, and if you're still losing money even after they've bought all their games, what's the point? You were better off never selling them a console in the first place.
Of course, the winner in this scenario is third party publishers, who don't have to eat the cost of the Wii U, and would see their gains go up with the install base. So there'd be some value (not sure how to measure that) in Nintendo "taking one for the team" and losing tons of money for the sake of third parties.
What is obviously a better idea is aggressive bundling (which is why we always see so many bundles). A $100 price drop translates into less than two games for the consumer, but giving away two games only costs Nintendo an average of $40 (this is why the Deluxe bundle has all the bells and whistles that add up to more than $50 for the purchaser). If Nintendo begins bundling Wii U consoles with a game (Wind Waker, NSMB U, Call of Duty, etc) + a pre-installed Nintendo Land that's only costing Nintendo an additional $20 but offering the consumer +$60 in value.
Obviously this all excludes normal price drops as manufacturing costs go down etc.
Sorry if this was confusing, I've been typing this (and double checking my numbers) for almost two hours now, just to make a thread that is essentially "tl;dr Nintendo would lose a ton of money they'd never make back by cutting the price $100"