Many good points mentioned here, and good suggestion as to the 'why is this happening'. Since this is the action of many independent contenders, and not a group decision; I don't believe that one reason is the sole and only reason. There may be multiple factors influencing this.

However, my best estimate is that it is merely the market reacting to its competitors. For example; BA does not invest in a 2-2 layout on their short haul fleet, because their competition does not. It is as simple as that.


***rant starting***
When competition goes up, prices go down and service offerings go up (generally). We can see this elsewhere as well. On highly competitive routes, you find the newest planes with the newest amentities. On less competitive routes, you find older planes with older amenities. Take for example the route of KLM from AMS to BON. Why do they charge more for this particular route (than comparative routes) and give the less desirable cabin (older IFE, no power)? Because they can. If you compare the 10h flight to Bonaire with the 11h flight to Tokyo, you see that Bonaire is consistently priced at $1100 from Europe, while Tokyo is consistently priced at $700. Why? Because if you want to get to Tokyo from Europe you have a lot of choice in airlines with 1 connection (EK, SK, LH, LX, BA, AF, KL, etc), while to BON there is generally only KLM who offers 1 connection flights...

Benefit of 2-2 layout vs 3-3 layout on narrowbody is described above, but I will repeat. You can attract the premium payers to your services and away from your competition. Downside is that you cannot 'right-size' your fleet for the particular route (LHR-FRA in the morning with 20% J passengers, LHR-LPA with 2% J passengers in the afternoon).