In some kinds of markets, established producers may be able to discourage the entry of new firms. They can do so by holding down the price, so that entry is less attractive. This works to the disadvantage only of less efficient firm and gives society the benefit if lower prices. This sort of rivalry is socially beneficial.
On the other hand, there are a variety of ways in which established firms can raise the costs of actual or potential rivals. This sort of strategic behavior is not socially beneficial, especially when (as is usually the case) it involves a costly investment.
Advertising/Research and Development
Advertising and research and development (R&D) are multifaceted phenomena. They contribute to product differentiation and (as noted previously) may allow existing firms manipulate the entry decision of potential competitors. But advertising also conveys information, and by so doing may make a market more competitive. Indeed, a new can advertise to let potential costumers know that it has arrived on the scene. Advertising may thus be a tool by which new firms compete.
Similarly, society often benefits from R&D. R&D may result in completely new products (product innovation) or in more efficient ways of producing techniques are essential to technological progress, a desirable element of market performance.
Performance
In competitive market (and in long-run equilibrium), the quantity demanded equals the quantity supplied at a price equal to the marginal cost of production. Production is efficient: all firms have access to the same technology, and firms unable to use the available technology effectively lose money in the short run and disappear in the long run. The issue of technological progress does not fit comfortably in the model of perfect competition, which assumes complete and perfect knowledge of the available technology. This situation, too, is different when competition in imperfect.
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