We do the second option. Everybody usually orders one or two things and then we all share. If it’s someone’s birthday, we just exclude the birthday person, so if it’s 8 people altogether, it’ll be split into 7. I have never come across a situatoin in which the 1st option was used. I guess it depends on the group dynamic, if i dine with the same people enough, I’ll know what I should and shouldn’t order and if I feel like ordering something more expensive…I’ll ask the waiter/waitress to put it on a separate bill.