I don't see where it's any different than offering your existing customers a substantial discount not
to shop around for alternatives; or switch to a competitor's product. It's called an upgrade price - and software companies are routinely criticized for such price reductions not being large enough.
Competitive pricing (sometimes called "side-grade") is no different than any other loyalty incentive. It can be seen as either a reward - or a bribe - depending on your degree of cynicism and where you currently stand in relation to the product in question.
In most cases, a competitive upgrade amounts to nothing more than offering the so-called 'returning customer' price to a qualified 'new buyer.'
I don't think ethics is a factor at all. In capitalist markets, the whole thing is based on a Darwinian model of "last man standing." Think: economic version of the concept of "tough love."
The capitalist free market model also presumes that the eventual outcome of any market, once it reaches full maturity, will be the emergence of a 'natural monopoly' with one remaining supplier. In theory, that made them the proven 'best choice' by virtue of their survival.
If markets truly were 'free' and competitive, that notion would likely be true. But since they're not, it's little more than the topic of an interesting academic debate.
Personally, I don't have a problem with businesses that offer incentive pricing.