I tend to see this sort of thing as not a failure of competitive markets but an consequence of them working too well. With perfect competition everyone ends up with close to zero margins. One way to avoid this problem is to make a high end product for a while, gain a good reputation and then cost reduce the heck out of the product. Then you can charge for the high end product while only paying to make the absolute cheapest thing that sort of looks like the original product. You get to actually make some money for a while.
Professional marketers apparently refer to this sort of manoeuvre as "harvesting the brand".
Professional marketers apparently refer to this sort of manoeuvre as "harvesting the brand".