Yes, you are correct. Anyone willing to take 20% less profit for a set is a dummy. I would use any number of other nouns to describe such a person, but they all get censored. I don't care if you have 10, 100, 1000, or 10,000, if your plan involves selling stuff for 20% less than what you could sell it for, you're an idiot.
As for using automated repricing tools, I can't think of anything better for my business than racing someone to our lowest limit to sell something that would sell just fine at its current price. That's genius.