[Principled]

They could race each other to the bottom and both go broke or they could put similar prices (the market price) on their similar products and both make a decent profit.

The drive is to maximize profits, not keep them from growing.

[Your Nightmare]

The drive is to maximize profits, not keep them from growing.

Exactly. That's why both businesses do better by avoiding a price war then they would by continually undercutting the competitors. You really should read up on game theory. Pricing is not as simplistic as you pretend.