PC Gamers have the benefit of intense, huge competition though- which gives them more power than consumers have in most industries. This is why Steam has been trying so hard to keep prices up- I think they have a genuine fear that a price war will kill a lot of good developers and do real harm, and I think that fear is justifiable. The pressure, particularly on indie developers, is intense.
I think Valve's plan is counterproductive due to simple substitution effects and income effects. I believe lower game prices tend to make people spend more on games, it just gets spread around more- then again, that does mean less deserving developers would get more of the spoils. That said, this wouldn't hurt Steam much- as I think the truly great games would still do very well, and Valve would get more money.
While Paradox's price hikes this doesn't impact me, it furthers my sense that Paradox is not a company I should be looking forward to much good from in the future. I still like the developers at Paradox, but as a publisher they're getting close to EA-tier right now in terms of providing value for my money. I compare them to certain other companies where you may not get what you want at release, but you get real value eventually.