Help on clearing the ambiguity on max bids and actual PPC please!

[Macbeth]

I have a companie that sells coffee equipment and cofee online. I am using PPC to promote my online sales. However I am confused by the whole PPC malarkey. Consider the following:

Rank Company Max Bid Reality1 Reality2

1 A 6.00 2.02 4.01
2 B 4.00 2.01 2.01
3 C 2.00 2.00 2.00

Now suppose I am company A. If the max bid of my nearest competing bidder was £4, would I be paying a penny above his/her max bid (reality 2 £4.01) or above what they are actually paying (reality 1 £2.01)?

Somebody please clarify this!

Also, do the rules work the same in espotting and google adwords?

Cheers in anticipation of your help.

[Macbeth]

I have tried looking on the overture website but it doesn't really answer my question.

Would someone mind helping me out please?

Cheers,

A

[eWhisper]

You pay $0.01 above what is needed for the position. What the competitor is willing to pay is what the 'penny above' is based upon.

Here's an example:
Rank.....Bid....Actual
1.......$4.00...$3.05
2.......$3.04...$1.99
3.......$1.98...$0.11
4.......$0.10...$0.10

[bostonseo]

People who create bid gaps like this example are IDIOTS and are probably sent free yahoo fleece jackets every month.

[werty]

Either that or it is people who carefully track their campaigns and know the value of an individual term/click.