they literally fight for power over each other (usually the newer modified files will be the first to show up.)
Lol, they wont fight and newer files will not be read earlier

The game simply reads all the files in alphabetical order.(unless you use subfolders wich will be read first.)
But it will load each guid of the file in its memory.
The moment it will run into another file with the same guid it will simply ignore it.
One of the reasons i strongly advise people to make a seperate Defaults folder in the sims2 directory(not in the downloadfolder) to keep things organized and that if there is somewhere a replacement in your downloadfolder that you installed ages ago and cant locate it will be ignored while the defaults folder is higher(alphabetical) in order.