I think it's a very smart thing to do:

1) Rebates are on 1 week old + titles, which means that the bulk of the new game sales GME typically does (pre-orders + week 1) are done at full margin.

2) Deflating the entire category this way doesn't change at all the margins GME will make on used games - they'll just buy the used games from consumers at a lower price.

3) It puts Best Buy / Walmart in a tough spot as the latter two probably benefit the most from "catalogue" sales (sales after the launch peak).

4) Matching Amazon's pricing will improve GME's direct-to-home sales (they've also added a free shipping for orders over $25).