It's a race to the bottom, why wouldn't they follow?
Does LY have a higher percentage of observant travelers which usually check bags?
Yup. Pay $120 to check a bag or $115 to get a regular economy ticket that includes checked luggage, seat assignment and ability to change (for a fee). 
Someone is doing some math. At the same time some people dont travel with check in luggage. I am guessing this dos not sound familiar to you, but some travel light.