Ad positioning
In our experience, it is rarely the case that being in Position 1 is the best place for an ad to be in order to generate maximum Return On Investment. The exception to this rule is where you are simply after maximum traffic, in which case the no. 1 AdWords position in the highlighted section - i.e. the very first listing in the SERPs, where there is a highlighted ads section - is the best position to be in.
While there are no accurate data from Google, experience suggests that this no. 1 position will attract more than twice the number of clicks of those ads in positions 4 downwards.
This level of popularity, of course, comes with a price. If you're attracting more clicks, you're obviously paying more overall, as each Click comes with its respective Cost.
The use of attractive ad copy is paramount here for generating more clicks without paying too much for them - raising an ad's CTR can see it being positioned at no. 1 without having to pay a large amount per click, thus maximising ROI.
Looking back to our signup procedure, where we used the "View Traffic Estimator" tool to see where our ads would be positioned, this is why we wish to see the estimate reading 1-3 in the first place.
If we start off in a high position, we will automatically attract more clicks, which allows us to drop our CPC over time, as the Ad Rank score will be boosted by the high CTR.
Thus starting off bidding high, then gradually lowering the Maximum CPC, will provide the best results in the long term.