This sounds more like a theory than a real-world analysis. I've been using PPC for years. Some of my bids are up, some of my bids are down, and some are about the same. What is true is that the more competition you have, the smaller your potential profit margin. That's just basic business. If a company is not consistently trying to improve its ad quality, landing page quality, or competitiveness of its products, I wouldn't be surprised if their profits continually dwindle in the face of competition. If you're not continually striving to do better, examining how new opportunities can be exploited to increase your profitability, and facing challenges as they arise, then you don't belong in business.