All other things being equal, if you’ve set a maximum CPC bid of $1.00 for your ads, and if the next most competitive bid is $0.50 for the same ad position, what is the actual amount you’d pay for that click?
Your actual cost per click (actual CPC) is the final amount that you’re charged for a click. You’re often charged less – sometimes much less – than your maximum cost-per-click (max. CPC) bid, which is the most you’ll typically be charged for a click. Actual CPC is often less than max. CPC because, with the AdWords auction, the most that you’ll pay is what’s minimally required to hold your ad position and any ad formats that are shown with your ad, such as sitelinks.
For ads on the Search Network, the minimum Ad Rank required for ads above search results is generally greater than the minimum Ad Rank required for ads beside search results. As a result, the actual CPC when you appear above search results could be higher than the actual CPC if you appear beside search results, even if no other advertisers are immediately below you. Although you may pay more per click, top ads usually have higher clickthrough rates and may allow you to show certain ad extensions and other features available only in top ad positions. As always, you’re never charged more than your max. CPC. bid.
If the advertiser immediately below you bids US$2.00, and if that advertiser’s ad is the same quality as yours (and has equal-performing extensions and ad formats), you’d typically need to bid a penny more than US$2.00 to rank higher than that advertiser and still maintain your position and ad formats. With AdWords, that’s the most you’ll pay (about US$2.01), whether your bid is US$3.00, US$5.00, or more.
Read more here: https://support.google.com/adwords/answer/6297