I submitted a series of keywords to Google and noticed something odd. At first, the minimum bid on a keyword was $2.50. A bit high considering the low traffic but none the less, I accepted it. After 12 hours, there was 2 impressions and 1 click, a 50% click rate. Here is the odd part, the keyword stopped and the notice put up by Google was that I had to increase my minimum cpc bid to $5.00. Now, it couldn't have been due to the traffic % or the price at the original minimum. Could Google some how be cheating?
If you think about it, Google can do what it wants. They do own the monopoly online when it comes to search which is fine with me, all the power to capitalism but at least be fair about it when it comes to pricing. If I bid $2.50 on a click which is much higher than the industry norm, don't double that rate just because I get a 50% click through rate.
Traffic has nothing to do with the price, directly. Price is determined by how many others are willing to pay for that keyword and what they are paying for that keyword - traffic relates, but indirectly.