A drop in CPM/RPM during the day is logical, the best paying advertisements are showed the first.
The main reason for high RPM early in the day is due to a bias of how the data is collected/reported. RPM(page RPM) = earnings / page-views * 1000. Say you get a click on the first page view of the day at midnight plus 1 second and the CPC is $1.00 your RPM will be $1 / 1 * 1000 == $1000 RPM. Wow! that is awesome. After the second page view $1/2 * 10000 = $500 RPM, less than before but still Wow!, by 8am you have 1000 page views now your RPM 1/1000*1000 == $1, not so wow.
Now lets change the scenario. Midnight + 1 second, 1 PV, no clicks RPM = 0, midnight + 2 seconds -> 2PVs no clicks RPM = 0, >>> 8am 1000 PV, 1 click 1$ RPM $1 not so wow. If in scenario 1 you would check you PV shortly after midnight you would go to bed thinking you would wake up a wealthy person but instead you wake up to check your stats feeling like you were robbed. In scenario 2 you go to bed feeling like your going to need to work another day, and wake up to find confirmation of that. The two scenarios are economically equivalent, the difference is the bias caused by how the data is collected and reported.
Once you understand this you clearly see that there a no market forces causing better paying ads to be shown first.
There is a theory that suggests the opposite (along with plenty of anecdotal evidence). The idea is that if AdWords were to consume budgets early in the day (or what ever the budget horizon is) high prices could be achieved, eg: advertiser has a $10 budget for the day, 1 click at 8am for $10, budget is filled and there are no more clicks for the day. But then in the afternoon another advertiser appears in the market with a budget of $20, but now since all the big bidders have spent their money, demand is now low and high prices can no longer be achieved. So the afternoon advertiser ends the days with $10 unspent of its budget. So Adwords needs to ensure a steady level of demand during the day as this will ensure that budget are fully consumed. Thus the result should be that prices go up towards the end of the budget horizon. This is why anecdotally there appears to be a bias towards higher earning at month end, and quarter end. I have my doubts whether this theory really holds in practice, but that is the theory...