Let say this competitor is selling the same product at the same price to the same target audience; therefore, both of you are bidding on the same keywords?

Then you should ask this question: How do you make your advertising campaigns perform better than those of your competitor?
I'm going to skip a lengthy discussion on marketing and sales, but instead I will
outline a few factors that make a winner in the "AdWords game".

Here are some basic tips on AdWords game:

● Your ads need to rank as high as possible on the list; above your competition,
if possible.
● You need to pay as little as possible for each click, while ranking high.
● Your targeting must be as strict and narrow as possible.
● You need good ad copy to attract the "right" audience.
● Your ads must have high CTR.
● You need high conversion ratio.
● Your site must sell better than your competitor's site.

there you go ^^.

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