That's fascinating. I don't doubt your story, but CO usually doesn't run "Dutch auctions" for pricing. Insurance companies don't refund your premiums if you don't have an accident. From my experience with CO's capricious handling of upgrade miles, I'd wonder if you simply got lucky.

Putting more resources into a bid for First increases one's certainty of sitting in First. This is how it should be; CO is milking its customers' different payoff matrices for the First/Coach choice, ranging from "First would be nice, but so is an exit row, and I'd never eat the food in First on the ground" to "The horror of sitting back there with the cattle!" With different payoff matrices, different price differentials make sense, for playing the odds of sitting in first.

If a Plat pays a Y fare to sit in First, but as it turns out they would have cleared on an M fare, CO doesn't refund the fare difference. Offering miles for the upgrade is like paying a higher fare class, to reduce uncertainty. However the dice did roll, one reduced uncertainty by offering miles, so CO delivered value for those miles.

I was the lone battlefield upgrade yesterday, EWR to SFO, with 61 elites left on the upgrade waitlist. If I get my miles back, I'm going to assume it was by mistake.