Final answer:
A competitor with poor-quality products is likely to initiate fewer competitive actions until the quality issues are resolved to avoid further damaging their market position and profitability.
Step-by-step explanation:
Quality affects competitive rivalry because a competitor whose products suffer from poor quality will likely initiate fewer competitive actions; the quality problems are corrected. Competition from firms with better or cheaper products can reduce a business's profits, potentially driving it out of business, and affecting workers' income and job security.
Conversely, businesses that offer better or less expensive products can increase their profitability and pay their employees higher wages. In a market with imperfect information, both buyers and sellers can be discouraged from participating. High-quality sellers might find it difficult to compete if they cannot demonstrate the superiority of their products, and buyers may be reluctant to pay more for assumed quality benefits that are not apparent.