Isn't it also a matter of ego? There probably are not many competitions for designing small family houses, but they don't add much to an architect's fame, so instead they compete for the big, prestigious projects.
I don't think there are different economic rules for architects than for the rest of the world.
I've never seen a competition for a small family house. The competitions are usually for larger projects as organizing and running a competition is not inexpensive and requires jurors, marketing and prizes.
I try to never do competitions as you are right on point 2, the economic rules are the same.
I don't think there are different economic rules for architects than for the rest of the world.