The Art of Choosing Your Tier
There are several factors that should be taken into consideration when selecting what tier of a masternode you will chose to run. Obviously, the number of coins you have available is important. If you only have enough for the first tier, then there isn't any further decision required. However when you have coins for multiple tiers, one should put some thought into which tier they wish to run.
The next consideration should be your cost of running a masternode. If running 3 masternodes costs you more than running 1; then you will have to weigh the costs vs. the rewards to determine what makes the most sense for you.
The most overlooked consideration, however, is the existing landscape of masternodes on the network. Each tier must play a role in each block. Therefore the less masternodes of that tier available, the more blocks each individual masternode will be involved in.
While a tier 3 masternode may pay 5 times the reward of a tier 1 masternode, if there are more than 5 times as many tier 3 masternodes; the frequency of payout from the tier 1 masternode seeing more blocks will make for that masternode to earn more per day. In other words, if there are 100 tier 3 masternodes, and there are 50 tier 1 masternodes; the tier 3 masternode will earn about 14 rewards a day, where the tier 1 masternode will earn about 29 rewards a day; which would result in the tier 3 earning 8.4 coins per day, and the tier 1 earning 3.48 coins per day.
However; what about the collateral? For the cost of the tier 3 masternode, you can run 5 tier 1 masternodes. Five tier 1 masternodes generating 3.48 coins per day will generate 17.4 coins per day on the same collateral that you need to run a single tier 3 masternode; which only earns 8.4 coins per day.
So taking a careful look at the landscape of network, there may be other opportunities for earning more on your collateral then what may meet the untrained eye.