The C=64 began at US$595 -- which was still a bargain for that time -- and you had to go to a computer store to buy one. in NYC, those were generally snooty places that catered to Suits. So the price drop to US$199 within a short time was an even bigger shock.
According to "Commodore - A company on the edge" it was a snap decision by Tramiel to get back at Texas Instrument (who nearly caused Commodore to go bankrupt during the "calculator wars") while they had the chance, because he realized TI was essentially bleeding money on their computers to build a software market - at one point TI was losing $100m a quarter on the home computer business .
So he slashed the price of their hardware and cut the price of all Commodore's software titled in half, preventing TI from raising their hardware prices again, and cutting off their air-supply by making it near impossible for them to make back their losses through software sales.
While Commodore could afford it, thanks to ownership of MOS etc. that pushed their manufacturing cost extremely low and meant they'd still make a profit on every machine sold, they shafted their retailers massively by not giving them any time to shift existing stock before announcing the price drop, and it ended up costing them a lot and apparently infuriating Irving Gould and contributing to Tramiel getting ousted (the other big factor was his ongoing attempts to get his sons into high level positions at Commodore).
But it made TI announce plans to exit the home computer business pretty much immediately...
