Yesterday, Jonah Lehrer (of Seed Magazine) posted a great find from The Boston Globe's "Ideas" section about brain functioning under different competitive scenarios. It appears that humans retain their competitive nature only up until a point and that when a group becomes too large to be competitive within, the brain essentially shuts itself down.
In one study researchers observed different sized groups taking test like the SATs and found that in small groups students performed much better than those in large rooms with many other test-takers. It appears that when in small groups, a participant is able to better size up their competition. Test-takers who were housed in a large room had lower scores, presumably because they were overwhelmed by the amount of competition they were up against.
An unrelated study looked at similar phenomena from a different angle. In a supermarket a display of jams was set up for customer taste-tests. When only 6 competing jams were used, sales increased among the products displayed. Then, when 30 different jams were displayed for the same purposes, people basically wanted nothing to do with them. There was such an array of choice that their brains short-circuited attempting to make any sort of decision. However, the study also found that when products were placed into categories—however arbitrary—people had a much easier time choosing a product or making a decision.
These findings seem completely plausible to me judging by my own behavior as well as what I've seen in my non-scientific daily observations. Give people small groups in which to operate and they find it much easier to orient themselves. I know in dealing with music, as seemingly arbitrary as "categorizing" bands and sounds can be, it is really helpful for our brains. Providing a label creates a foundation from which to analyze and associate; from that beginning one can make all sorts of further connections and establish their own web of knowledge. If you were to take a random assortment of bands and have someone start picking out the "best" (for lack of better example) bands in that pile, that person would have a panic attack. But if you had them organize that pile somehow and then pick out certain elements, they'd have a much easier time.
As far as competition goes, some commenters wondered how professional athletes (as one example) operated on such a high level in the face of this research. I contend that the best of the best don't even consider most other humans viable competition, and thus render them out of the picture. From a young age they've most likely—and clearly I'm assuming here—picked out a few other talented individuals against whom they could compete on a high level. At each stage (high school, college, pro, etc.) the categorizations of who matches their skill is refined. I think the same could be said of any endeavor, whether it's basketball, soccer, painting, poetry, furniture design, gardening, politics, etc. Folks who engage in these activities who have a desire to be good at them always find markers against which to measure their competition.
Back to the original point of the study, although this kind of competition in humans appears obvious, I think it's great that science has shown it to be an observable phenomenon and non just some folksy, anecdotal thing. Also, the fact that there are clear limits to the efficacy of competition amongst individuals is a great thing. Now, when some economists come along and make the claim that more and more actors in a market is good, we have this evidence to back up the counter-argument. Some competition is a marvelous thing, too much competition is a waste of everyone's time.