Your competitors are running ads so you decide you need to also.
You base your bids such that your average position is 1 to 1.5, i.e. you want to list higher than your competitor.
In response after a couple of weeks, they raise their bids to list higher than you.
You now have a choice, increase your bids again or be happy rank below your competitor.
Is this what is occurring? and is this why the CPC for very niche keyterms is now so high when logic would suggest that they are niche terms and wouldn't be worth a great deal to advertisers?
Are we all bidding ourselves up?