Is this how bidding works?

Trying to understand the "penny more" system from Google.

Would this be a decent outline?

Where did I go wrong?

Let's say Website A has set a bid of $10.00 per click.

Website B is bidding $3.00 per click.

Website A would be shown first, and each click will cost them $3.01.

Now, let's say Website C comes along bidding $6.00 per click.

Website A would be first, paying $6.01 per click.

Website B would be second, paying $6.00 per click.

Website C would still be third - paying $3.00 per click.

Ok, the big mega mart, known as Website D, comes along and bids $12.00 per click.

Now the order is:

Website D on top at $6.02 per click

Website A at $6.01 per click

Website B at $6.00 per click

Website C at $3.00 per click

 

this is not always true
just cost of bid does not determine position
ad rank which is partly calculated based on QS - quality score determines placement after bidding
So if you have a very high ad rank you could win positions on slightly higher bids
also the lowest bidder may C may pay a lot less than the amount shown provided he is aware of placement and changes bid again so he can in fact not pay $3 but as low as 0.01 on a perfect QS

qs comes from creating super targeted ads to super targeted landing pages and getting high ctr
this is why you see people have 1 ad group 1 keyword combos
given this is extremely tedious and takes a lot of effort to set up or requires a large budget to get these lower costs and higher QS

AD Rank = Quality Score x Max CPC
So if you had over twice the quality score as the highest bidder you could rank 1st even if you bid less than half

There is also minimum cpc which is based on historical values of bid amounts so this may effect the lowest bidder if he is aware and adjusts lower but as always it will be ok for him to do this since he is the lowest bidder anyway
in practice there are too many bidders for this to be useful as there are rarely just 3 bidders or even just 8

 

Last two lines are wrong. How can Website B take 2nd place paying $6.00 per click when their maximum bid is $3.00 per click ? Not possible. Website C will take over the 2nd place at $6.00 as they are bidding $6.00. Website B will fall to 3rd place as they are bidding only $3.00

As for website D.... if they set their maximum bid at 12.00 the order will be like this:

Website D at $10.01

Website A at $10.00

Website C at $6.00

Website B at $3.00

 

That scenario is only possible (if at all) if those sites have an identical landing page quality score, identical keywords, identical bids per each keyword / key phrase and the system estimates each site equally valuable to the search query. I am prone to believe that it will probably look more like this:

Website D on top at $6.02 per click

Website A at $6.01 per click

Website B at $6.00 per click

Website C will be a no show