Tesco in PlayStation price war

Tesco undercuts Dixons console prices with 'grey-market' hardware.

Thinking of buying a PlayStation this Christmas? You'll have Tesco to thank for the prices.

Supermarket giant Tesco is taking on traditional electrical retailers this Christmas in the console market by cutting the price of Sony PlayStations to match Dixons.

Dixons fought back against Tesco Thursday by cutting the console's price to £64.99 -- down a fiver from Tesco's rate. Not to be outdone, the supermarket confirmed it would match its rival's pricing, at least until it ran out of stock. Dixons' discount offer lasts through 21 September.

In a repeat of earlier consumer battles, Tesco said it was buying the console from unauthorised distributors in Europe, on the so-called "grey market", to keep prices low. Tesco has bought products such as Levi's jeans and Calvin Klein underwear on the grey market since April 1997.

Tesco has been selling PlayStations for about a year, but the current low-cost batch appeared in Tesco locations Wednesday.

A Tesco spokesman said: "This is about us bringing prices down via other -- or parallel -- channels, which inevitably benefit the consumer." On Thursday John Gildersleeve, commercial director at Tesco, warned Dixons, "Do not underestimate the power of our price cuts."

Dixons did not return press calls.