Well, the high school sports I participated in were competitive. In volleyball at least, we eventually went on to compete at the provincial and national levels. That meant that even though our team was a step above the other teams in the city, we couldn't afford to go easy on anybody. We weren't cocky, and we didn't rub it in peoples' faces, but I think it shows a lack of pride and respect (for yourselves and the other team) to not "show up" and play/perform your best. I would consider this to be in a competitive circuit though.
Now, playing in intramural soccer etc. at university, I don't think being 100% competitive is totally appropriate. Universities have varsity teams where you can compete against other serious teams. Intramurals are meant for trying new sports, meeting people, having fun.
So, in the end, I think it comes down to being aware of what arena you're playing in, so to speak. In high school sports, you have to be aware that while you might not take the badminton team seriously, somebody at another school probably does. If they hand your ass to you on a platter, you can't complain about it. Competition between high schools, regardless of the sport, is different from fooling around in P.E. I think it's completely appropriate that someone who takes the given sport seriously should try their absolute hardest in every match. You would be denying yourself learning/advancement opportunities if you didn't.
I've been thinking about team sports though. If your team is competitive, you have a responsibility to your team to try your hardest. But as balefire88 said, if it's an individual sport, I think that if you're considerably stronger than someone then you may very well choose to take the opportunity to teach the other person a few things, and structure the game/fight/whatever so that they can learn as much as possible from it, even if it means you losing a few points. It's still your choice to go all out though, especially if you're training for a tournament and need to condition yourself mentally.
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