The conclusion of the argument is that "stiff competition can undermine the result it was intended to achieve." How do we know that? Well, we know that some managers intend to use stiff competition to maximize performance. We also know that sometimes in competitions where one competitor is seen as clearly superior, other competitors "become anxious and doubt their own ability to perform."
As is, the argument fails to connect this last premise to its conclusion. In other words, some competitors may become anxious and question their ability, but so what? What effect does this have? Does the anxiety improve their performance or make it worse? The correct answer should address this gap. Moreover, it should state that the anxiety/questioning is detrimental to performance, as this supports the conclusion that stiff competition can undermine the intention to maximize performance.
(D) "doubting one's own ability to perform can decrease one's overall performance" addresses this gap and supports the conclusion, so it is correct.
Does that make sense? Please let us know if you have any other questions!