I often hear this argument, but if it was fact, wouldn't it prevent the price to get very high? As new merchants start selling, they would fight by offering low

I often hear this argument, but if it was fact, wouldn't it prevent the price to get very high? As new merchants start selling, they would fight by offering lower price than competitors down to the rate they feel is still worth the business (supposedly still way higher than usual price). It seems to me that those things happen so fast, nobody has time to settle a new trade route and local businesses are the only ones to profit from it, with no side effect. I guess this argument would be right if we were talking about long term situation.