Phil,
I have known firms that quote rock bottom prices to get the custom, and then end up with a monopoly, There is something to be said about discount for quantity, and it does not always affect quality. An example is if you had supplied all the graphics for say, microsoft products, since Bill started out, and just made 1p clear profit on each you would probably now be a rich man and retired in the sun.
I do the best I can for a reasonable price, If I am undercut, I let them get on with it. I price my services to suit my overheads and lifestyle.
Peter