[It doesn't matter how many competitors there are. None of them profit by making it a race to the bottom.]
No, but the collusion/trust/price-fixing that might exist in a two-competitor market doesn't exist in a larger market.
[If there is a large pool of new entrants into the market and replace the supply that left, how is the company going to make more money by lowering prices? ]
The established seller hopes to gain that market share and increase profit by increasing volume. If he can do that and establish some brand loyalty, he can capitalize on *brief* periods of higher prices and higher volumes. It is those brief periods that attract new entrants, though, so over the long term, the average of prices always returns to the level where profits are just barely worth running the business -- ie, the profit exceeds costs plus risk as compared to other investments.
I've worked in a very competitive business for 20 years. As much as we always promise we won't participate in cut-throat competition, it always turns out that way. We try to focus on our new designs where profit is higher because head-to-head competition doesn't yet exist. But the edge doesn't last long before competitors have alternatives to offer customers and the cutthroat competition cuts the profit again. We stay in a market until the net profit is down to 8%-9% and then we exit. That is the reality I've observed over 20 years.
It exists is every market. What businessman is so stupid as to not know (or even want to know) what his competitors are charging for similar products?
At the same time, not every business caters to the retail bottom and margins get very high among many companies without so-called collusion.
I've worked in a very competitive business for 20 years. As much as we always promise we won't participate in cut-throat competition, it always turns out that way. We try to focus on our new designs where profit is higher because head-to-head competition doesn't yet exist. But the edge doesn't last long before competitors have alternatives to offer customers and the cutthroat competition cuts the profit again. We stay in a market until the net profit is down to 8%-9% and then we exit. That is the reality I've observed over 20 years.That's basic supply and demand. Competitors enter your market raising the supply and lowering the price. Your price goes down even though your costs didn't. You didn't want to lower your price - you had to.