Site 1 sets a max cost per click of $0.40 and achieves a CTR of 2.1%. The rank is then 0.4 x 2.1 = 0.84.
Site 2 has a max cost per click of $0.20 and a CTR of 6.4% giving a rank of 1.28.
In this situation, and assuming no one else is bidding on this term, site 2 appears above site 1.
As controller of site 1 can't I simply increase my max cost per click to $0.65, thus achieving a rank of 1.37 and go to the top of the listings? I won't need to pay $0.65 however as Adwords specifies that I'll only pay a cent more than the listing beneath, ie. I'll only pay $0.21 for the top position.
Do I understand this correctly or is there a gap in my logic somewhere ?