Earlier quoted context omitted.
Airlines overbook because people don't show up for flights. Overbooking means airlines can offer passengers refundable tickets. Occasionally they get it wrong and have too many people show up. So they offer compensation to get people to voluntarily give up seats. If they can't get people to voluntarily give up seats they have the right to pick who to deny service to (but by law have to pay specific compensation to).…
This is silly. If every plane had every ticket sold and no one showed up, the airlines would make out even better. Less cost of food and drinks, fuel, labor costs in moving baggage. Airlines should HOPE people don't show up and take seats on the plane. This idea that they overbook because people don't show up is a money-grab and when it bites them in the ass I, for one, am glad.
IMO a better system would be a more market-based solution.
Disallow involuntary bumping except under exceptional circumstances, and require airlines to up theirs compensation until enough people voluntarily bump themselves. Airlines would still oversell but at lower % because the cost is now higher. And people who get bumped are at least given satisfactory compensations.