Your second hypothesis might well be true, as that is kind of what drives publicly-traded companies. None of the handful of companies I could think of off the top of my head are public. Most notably, the Sprint MVNO Ting, which could easily charge more than they do and still be one of the cheapest around, and who totally don't technically NEED to make it so easy to talk to a competent person on the phone if you call them for help (nobody else does...).
Fresh & Easy, the west coast supermarket chain, also came to mind, though sadly their prices have been going up and variety and quality has gone down slightly since Tesco sold them to a US investor. (It was previously our favorite market by far for a number of reasons; now they're more on par with Trader Joe's, which still isn't terrible, but they used to be so much better. Of course, they also were, as a Tesco CEO said before they sold it, "hemorrhaging money". Apparently they could only accept that for so long.)
To my knowledge, though, Ting is definitely making decent profits. They could just probably make *more* profit if they wanted to cut some corners and raise their prices (as opposed to what they did a few months ago, which was to randomly decide to *lower* their prices even more).