I completely agree, however from the airline revenue management standpoint, the issue of the premium seat going out empty remains. On my recent UA flight from HKG to EWR there were 3 empty seats (one of which was incidentally next to my seat) in C while economy was oversold. Allowing those 3 seats to go out empty was a complete waste, and should be somehow avoided.

Therefore some sort of formula needs to be developed which involves, on one hand, balancing a system for upgrading using points AND a restricted C product for a price that leisure passengers are willing to pay WITH some sort of last minute revenue generating scheme to ensure that C class seats do not go out empty on flights oversold in Y, on the other. This scheme should also be tactful and preserve the exclusivity of the C product.