I know this effect is pretty common now, and has been for at least the past year or two.
One of my websites has moved from position 1 to 2 and then to 3 (over the past 8 months), the traffic has remained stable with the average daily visitor count almost identical regardless of position.
Traffic capped at the same daily amount (almost identical each day) - no matter what position it appears for big keywords. Also, if I create a new pages which ranks very well, then the traffic from other pages are reduced which keeps the total traffic figure the same.
Rotating good/poor traffic:
This website may make 15-25 sales per week, 80%-90% of these sales are recorded within a 24 hour period each week. So for example, Between Monday 6pm to Tuesday 6am I may get 15 sales, then nothing for several days. this will shift every couple of weeks (example, week 1 to 3 may get 80% sales on a Friday, then 4 to 8 shifts to a Wednesday)
Looking at the overall traffic, I see that between 30%-45% of traffic will come from India. However, less than 0.5% of sales are from India (it may actually be less!).
It's appears than this website has been given a traffic cap, and a good v poor traffic ratio on a shifting rotating week.
Can anyone give any advice on how to best deal with these issues? how can I trade the poor traffic for good :)