There’s one game in town as tech pundits prep for Apple’s expected announcement Tuesday of an iPad mini: Name your price.

Estimates have varied quite a bit. The consensus is that the smaller iPad has to cost less than the iPad, but things get considerably more complicated after that.

Apple is moving into a market dominated by the low-cost leader, Amazon’s Kindle Fire. The newest 7-inch Fire costs $199, as does Google’s 7-inch tablet, the Nexus 7.

Apple doesn’t have to match those prices, but a $200 or $250 price difference would probably be a tough sell — even for Cupertino, Calif. Supposedly leaked pricing charts from Germany circulated last week indicated that the iPad mini could start at $250, which would place it neatly between its cheap competitors and the $500 price tag for the new iPad.

But there’s a potential problem with that price. Apple already has a little device sitting at the $300 mark — the new $299 iPod Touch. Can Apple really sell an iPad for less than the iPod Touch?

Daring Fireball’s John Gruber considered that question in a blog post Thursday. He noted a couple of reasons why that price spread would work.

While smaller gadgets are often cheaper than larger ones, he said, miniature devices often come at a premium. Plus, the iPad mini is unlikely to have the display quality of the new, retina-display iPod Touch. Retina displays, he said, are premium features. The new, smaller iPad is “not the premium model in the [tablet] lineup” — the full-size iPad is. Comparing the iPad mini tablet to the iPod line, he argued, doesn’t make a whole lot of sense.

In some ways, that’s a solid argument. People don’t tend to use iPods in the same way they use iPads. Tablets are mostly for reading, video and e-mail, which can be frustrating to do on an iPod’s 4-inch screen.

But the line between smartphones and tablets is blurring. The iPod Touch is essentially an iPhone that doesn’t make calls. You know, kind of like a small-screened tablet . It’s probably best suited for consumers who want a camera and music-focused device, but the iPad mini will likely appeal to some of the same consumers.

However, even if the iPad mini does snatch some sales from the iPod Touch, Gruber said, Apple still benefits.

In his words: “If a customer walks into the store and sees a (say) $249 smaller iPad and decides to buy that instead of a $299 iPod Touch simply because it’s cheaper and bigger at the same time, that’s still a win for Apple. The customer just bought an iPad.”

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