So long as capitalism exists, competition will exist. That competition is no longer the free market competition that existed even in the early days of capitalist production, let alone in the period of small-scale, independent commodity production that preceded it. It is globalised, monopoly-capitalist (imperialist) competition, but it is competition no less.
“In practical life we find not only competition, monopoly and the antagonism between them, but also the synthesis of the two, which is not a formula, but a movement. Monopoly produces competition, competition produces monopoly. Monopolists are made from competition; competitors become monopolists. If the monopolists restrict their mutual competition by means of partial associations, competition increases among the workers; and the more the mass of the proletarians grows as against the monopolists of one nation, the more desperate competition becomes between the monopolists of different nations. The synthesis is of such a character that monopoly can only maintain itself by continually entering into the struggle of competition.”
In the preceding era of free market competition, each producer sought to increase their market share by undercutting other producers. It was this plethora of small capitals, and petty-bourgeois commodity producers that determined the market-value of commodities, and it was the small number of larger-capitals that were, thus enabled to obtain, surplus profits/rent by selling at these market-values that exceeded the individual value of their own production. It was this same plethora of small private capitals, in conditions of all-out free market competition that led to the crises of overproduction of commodities, such as that of 1825.
By the latter half of the 19th century, it was already the large monopoly-capitalist (imperialist) producers that dominated the economy. It was their production that now determined the market-value of commodities, thereby, removing the conditions that enabled them to obtain, surplus profit/rent. It was now, the remaining small-scale private capitals and petty-bourgeois producers that had to sell at these lower market-values, and who, thereby, obtained lower than average profits, facilitating their ultimate dissolution and subordination to the large monopoly capitals. These large monopoly capitals themselves began to plan their production over the long-time horizons required to justify the investment in huge amounts of fixed capital equipment.
They found that the old free market competition of seeking to gain market share by price-wars was destructive.
“... if one firm out of a small group of firms raises its price, all the others, who at the old price were happy with the volume of sales they were enjoying, would see that volume of sales increase without their doing anything. Hence they might be expected to be reluctant to follow a price increase. On the other hand, one firm lowering its price would take customers from them, if they did not respond. Hence, to avoid this possibility these other firms would be likely to follow a price cut. And not only is there a priori plausibility here; there is also a certain amount of evidence from questionnaires circulated to firms that they do indeed tend to expect their competitors to react this way – not following a price increase, but following a price cut.”(David Laidler - “Introduction to Microeconomics, p 69-70)
As I have set out, elsewhere, in conditions where social productivity rises by an average of around 2% p.a., the unit value of commodities, also, continually falls, which, if the standard of prices remained constant, would translate into continual falling unit prices. For, one thing, a consequence of that would be that firms would, also, need to reduce nominal wages, each year, which workers would resist. So, imperialist states created central banks in the early part of the 20th century, which presided over fiat currencies. In so doing, they could inflate the currency supply, and, thereby, depreciate the currency/standard of prices so that, despite falling unit values of commodities, prices themselves did not fall, including the price of labour-power/wages.
The monopolies rather than generally competing against each other on the basis of price, sought to compete on the basis of costs. If each firm maintained its prices in line with others, but was able to reduce its production costs, it would make bigger profits. Bigger profits facilitated increased capital accumulation, but that was only useful if the market itself was expanding enough to absorb the additional supply. Otherwise, this increased production could only be sold at the expense of other monopolies. One solution to that, if prices were not to be reduced, was to offer real or supposed improvements in what was being sold. The development of brands, was a part of that. But, bigger profits, if not used for capital accumulation could also enable larger dividends to shareholders, which, then, resulted in a higher share price for the company. A higher share price for one monopoly against another, transferred the competition between them to the stock market, enabling the more valuable company to simply buy-up a controlling stake in another's shares.
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