I guess the counter-argument is to claim that the market for the original quality was going away. This does happen, too: the first-mover can essentially spend monopoly profits on making something which makes engineers happy, if they choose to. But as competitors catch up, customers start to vote with their wallets for the minimum usable quality. The early leader may choose to sell the same low-quality items and charge 20% extra for their name, but they can't choose to sell the high-quality items at 3x the price, if there are no buyers.
I guess the counter-argument is to claim that the market for the original quality was going away. This does happen, too: the first-mover can essentially spend monopoly profits on making something which makes engineers happy, if they choose to. But as competitors catch up, customers start to vote with their wallets for the minimum usable quality. The early leader may choose to sell the same low-quality items and charge 20% extra for their name, but they can't choose to sell the high-quality items at 3x the price, if there are no buyers.