It would definitely help and I would do it if your site is better than the one of your competitor. Of course that's always the case so I would vote for yes ;-)
Why would you want to help promote a direct competitor, though?? Surely that defeats the object of link exchanging - for the pontential of ranking above your competitors, if you are simply going to promote them at the same time??
It really depends on the market situation. If you are the only two and have been for a while, you might as well recognise the fact that there is enough for both, link to eachother to make it harder for others to come near the top. If you see serious opportunities though yuo could argue not to. Or drop the partnership as soon as you got high enough en enough links from other sources to carry on on your own.
Unless both of you are targeting/using the same anchor text Happened to me before. Came a time when he refused to put my anchor text on his site because he decided to use it also.
Ok, to mix things up let's change the context of the question. If you had a relatively new website and your competitor had an established website that was at the top of the search engines for the keyword/phrase you wanted, would you want to exchange links with them then? Why or why not?
I wouldn't exchange links with a direct competitor. I'd rather find another site of the same value (rank wise) that is very much related to my site and link with them.
As a generalisation I wouldn't - because you would then be helping strengthen their own position, just at the time when you need to try and close the gap between your rankings. Of course, it depends on what sort of markets are involved - in extremely competitive environments - viagra sales, for example - you might have to accept some degree of competitor recip linking. However, in such fields, you shouldn't be trying to be a direct competitor anyway - not unless you have a heck of an advertising budget. There are always other lucrative search terms to attack that your competitor is probably not targeting. Maybe it's less commercially lucrative, but if it can return sales then it's a niche to start from. General rambling 2c.
Yes - link with as many compeditors as possible. Because if you get the most exchanges you will come out on top. The site which has the most number of the top 200 (more?) sites linking to it will win (with the right anchor text). And if you are equal with one compeditor for the top spot, just ad more internal links to your links page/s so you pass out less value to your compeditors. If I could I would only link with my compeditors, as links from unrelated sites are worth less and less these days especially on a compeditive term. Look at the top players - I bet they benefit from Local Rank / Topic Sensitive Pagerank.
Yes I would link with direct competitors. Why do Jewellery Shops all have shops next to each other? Because they know that people will go to their area if they are wanting any Jewellery. At the end of the day you are probably doing more good by increasing your positions in the search engines. It's then your job to make sure you can at least offer everything your competitor is offering.
If I had a new site and my competion had a high pr why not trade links you be getting more from them then your giving. Many sites do not understand how to properly do an anchor link. You could always dump them when you catch up with them no point in draging them along
Haha Eddie I like your style Now get those posts coming in so you can get more links from your signature