The benefit of competing or having a match/challenge is that it allows you to improve your skills by testing whether they actually work, and if not, allowing you to make modifications so that they do work. Thus you become more highly skilled. The fact that some people may compete for what we may consider are wrong reasons, should not be a valid reason to prohibit competitions or challenges/matches. The remedy for students who compete for the wrong reason is to have an instructor who instils the correct values in their students.
I totally get what you're saying Daniel, but I see that kind of stuff in training as different than competing, don't you? The way you described the benefits are more like what you get in freestyle training. You ask for challenges from your practice partners and they work with you (even if that is "against" you, right?)
But then the whole emphasis shifts, doesn't it, when the purpose of the activity is to see who is better?
Have you ever had a practice session in any sport where part of the time is spent working together as a team or as practice partners and part as scrimmaging, bouting, matching, etc.? In the situations I've been in (fencing mostly) the whole attitude shifts. Your practice partner who used to help you see your weaknesses so that you can strengthen them is now out to exploit them. This is inherent in the nature of contests.
If there is
a "wrong reason" for competing (and not saying there is), might it not be because it encourages the exploitation of weakness for the sake of pride/winning? Is that what you meant by "the wrong reasons?" Or was it something else? More about "ego" maybe?