I once heard a story that an employee at Southwest had told Herb they should raise prices because they were so much cheaper than other airlines, Herb's response was "We're not just competing against other airlines, we're competing against the bus companies too." (I'm not sure the quote is exactly right, or if it's even true ...), but I think it's a good explanation of WN's pricing philosophy.

I think WN prices its product so that they can make a profit. I'm not saying that WN never prices its product in response to competitors, but I think it would be a stretch to think WN does this more than other carriers.

Little anecdotal story from my recent experience, I'm flying MCO-MCI on Tuesday, bought the ticket about a week ago. WN wanted $200 for the flight ... I had my choice of Delta, American, or United at $80. Considering WN's flight was non-stop at a good time, I could have easily justified using them in this case, I didn't, but I seriously considered it despite the relatively huge price difference. It would not surprise me at all if WN does in fact sell 2 tickets on their nonstop flights for $400 total for every 5 tickets the other carriers sell for $400 total ...