We frown on cost-based pricing for anything.
Pricing and cost are almost unrelated. Things are priced what they cost when they are plucked out of the ground, put on a truck, warehoused, and then delivered to the customer. Add any other step (say, "cooking") and cost no longer has anything to do with price.
This is not some web 2.0 thing. It's a fundamental principle of business.
Your question, as I read it, isn't crazy. It suggests, "if one way I can differentiate myself from my competitors is by being smarter and thriftier, shouldn't I be able to use that to differentiate my business through price?" The problem is that your cost should already be below the noise floor, and most nonzero prices incur the same hostility from customers --- so reducing your competitor's price point by 20% or even 50% might not help your business; it could even hurt.