Yes there are more schools in big cities and therefore more competiion, but there are also more jobs in big citeis hence the reason for multiple schools in N.Y., L.A., San Francisco etc. There are 7 ABA schools in the Bay Area and 3 CBA ones, but the Bay Area alone has millions of people and hence millions of jobs. You will have more competition, but more available positions.
On the other hand if you live in Spokane there will be less competition, but fewer positions. I am not saying either one is better it is just the reality of the situation. I think the only real screwed up thing is that there are two law schools in Lansing, Michigan that seems to saturate a market that doesn't exist. I know a lot of people like Michigan State & Cooley and I am sure they are good schools, but it just seems weird to place two high enrollmetn law schools in a town of 100,000 or so. Granted it is the capital of Michigan.