Probably the 2nd, at least around here.
For years Columbia was running two 2-day B-tiers a year. In March, exclusively at Earlewood Park, we'd fill to 100 in hours, sometimes minutes. In October, a crosstown with Earlewood and the lower-rated Owens Field, we'd struggle to 50.
Ashe County, a very highly-rated course in the N.C. mountains, ran a trophy-only event that filled. $25 entry, dri-fit players pack, barbeque lunch. On a course at least 2 hours from any significantly sized disc golf population. Yet it pre-filled. (In recent years I believe they've converted to a standard payout and are still filling. It just shows that it's possible).
For years Charleston filled on their annual temporary course at Hampton Park (My rating: 5.0), with a trophy-only event and, again, about a $25 entry. It filled, even when the nearest permanent course was 100 miles away. (It, too, has gone to standard payout).
Anecdotal evidence that the course matters more than the payout. But if the courses are closer to even, the payout will win out.
Also, anecdotal evidence that players will still clamor for payouts, and probably win out.
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At Stoney Hill we've run a standard 2-day C-tier in the Spring, and a 1-day fundraiser in the fall. In the fundraiser we had no players pack, and very modest payouts for pros & ams (half the entry went to charity). The charity event has drawn as well as the standard.
Crooked Creek runs 2 standard events a year. They also used to run 1 charity fundraiser, low entry, trophy only. The latter had the highest attendance.
None of which proves anything, except perhaps that there are circumstances where trophy-only will work, on a good or great course.