"Doubt it. There will be even less demand for FireWire devices which means that fewer companies will keep making them, reducing the competition."
You're not thinking from a "capitalistic" viewpoint.
Decreasing demand always results in lower prices. Doesn't matter if it's one or twenty suppliers, if folks aren't buying, prices will get lowered, or the product will get dropped.
If your product is priced accurately, but there's not enough demand, you're going to find it difficult to sell the stock you have.
If your product is priced higher than what the market will bear, but there's not enough demand, you'll be lucky to sell anything.
About the only exception is when a particular technology has declined almost to the point of extinction. Then, the market value of hard-to-find but needed equipment can actually increase. Think "SCSI", and the cost of finding high-speed SCSI drives today.
Prediction:
Firewire800 products _will_ drop in price, but quite to the price point at which Firewire400 products sell.