If I were an airline in a properly functioning market and with good management / strategic practices, my goal would be to aim to keep upgrades to as few as possible. Upgrades exist because the US carriers cannot get enough people to pay for the front cabins reliably.
If there were no upgrades and no possibility of upgrades, why would I fly United vs. AS or DL which give them? Or VX which does not give them, but has better service?
Although you can get 1K with $12K, most of those who are elites pay a lot more. And of those paying "a lot more" most (my guess is 95%) can't by corporate policy or client issues pay for F other than rarely for domestic travel.
Airlines make money off those who pay more, and complementary upgrades are designed to keep/attract the traffic of those who pay more.
I have personally moved my 100-150K BIS @ 30-40 c/mi domestic flying in chase of upgrades. I went from UA to TWA as TWA gave me upgrades. Then when AA took away those upgrades, I switched my flying to CO (and NW) for upgrades. When upgrades on CO became a sad joke c2005-6, I moved my flying back to UA, as I was going to get upgraded more with 500 e-certs and regional and SWUs than I was getting on CO. The math was very clear to me. CO was selling the FC seat for $50-100 more each way than it was selling my very expensive Y tickets. Since I was flying about 1 1/2 trips a week, getting into FC was going to cost me PERSONALLY (since my company would not cover in most situations) an extra $10,800 ($150 x 1.5 x 48). No way I was paying that, so I took my $50-60K in spending to an airline that would upgrade me to first class about 30% of my miles (500 mi+SWU+CR1s).
So did CO win on that deal? United then got years worth of B/M/E/H flying from me, all very profitable for them, due to CPUs.
I go to Seattle about every third week, because its a short flight, I will not buy FC. Always last minute, so I pay $400-800 RT (usually the higher end), and when I got to book, I can take DL (and sit in F as an "upgrade" at a PLT) or VX (no upgrade, but vastly superior E+ with drinks and snacks, and good coffee, as GOLD) or UA (and sit in uncomfortable seats in E+, with the FC seats going to TOD upsells, as a lifetime, but even as a 1K). Who do you think I book?
I am not against sales of First Class, but I think that those who are more valuable to United (not just GS) should be part of the equation.
For example, a flight with a several golds with $6K/year in spending on the WL for an upgrade, well perhaps a $109 TOD is a good use of that first class space. But if its a 1K who spent $40K on united last year, perhaps selling that TOD is not a good idea, if it causes that $40K in revenue to go elsewhere.
It is probably beyond UA's IT capacities, but I think the spread between (1) A/P fares and Y fares at any time, and (2) how much a TOD is priced at, should be not fixed, but
related to who is on the upgrade list.
To give an example, on a route like SFO-ORD (4.5 hours), where United has a bunch of 1Ks with high spending on certain flights, perhaps it should not set the spread between A/P and Y at less than $200, and set TODs as the amount that would top off the Y fare to that A/P fare bucket when its available. Yes, United would leave some revenue on the table, but it would have a pay back in less losses of high value travelers who fly domestically.