In general, competition brings out the best in my students--not always in every student, but for the majority of the time, it has a positive effect. For example, I use a team system in my classroom which encourages my students to compete for points by answering questions, following procedures, and participating in skills practice. For almost all of my students, the competitive aspect of the teams motivates them to participate more, speak up more, and influence their team members to quiet down more quickly.
Similarly, the competitive nature of class rank, GPAs, athletics, etc., motivates more students than discourages them. I know that some schools have moved toward not having valedictorians or numerical grades, but my students really like knowing where they're ranked in comparison to their peers.