I don't see Apple ever selling an iPad mini for $199 as they simply won't make any money on it. What's the point of selling millions of them if they don't profit? They don't make money on music and apps, so they have to make money on hardware. Ironically I think it is the appeal of the Apple ecosystem and App store that allows them to charge a premium on the hardware...
And why is the iPad mini supposed to appeal only to children, light users, schools and people who can't afford a 'full-size' iPad? There are plenty of people out there who simply want a smaller iPad at any price point, as long as it is full-featured.
So, count me amongst those who don't believe Apple will engage in a race to the bottom with Amazon, B&N etc.
Retina 16GB $349 - $399
Add $100 for 32GB
Add $129 for LTE
A6, 1GB RAM, front HD camera, rear 5MP camera
I do not see the Kindle Fire HD nor the Nexus 7 as the bottom Apple races too. In fact these devices have set the standard for price, features and performance Apple must compete against in this case. Apple can choose to charge more for less but they will not win the 7 inch tablet market if they do. They need to be in the neighborhood on price and performance.