I agree. Carry-on has always been a 'problem'. Not enough space (and older bins/hat racks were much smaller).
The airlines unbundle the prices letting one pick and choose what they want to pay for. Passengers do want the lower price, but don't want to pay extras - even if their airfare, plus a bag, is still much cheaper than the old days.
Some airlines (Swiss for example) have two prices on routes where they compete heavily with LCCs (GVA-LON for example) one including the bag, the other carry-on only. This allows them to compete 'price wise' with the LCC and give the passengers a choice. It isn't a much different choice with adding a bag-charge to a LCC price though.