I don't think the system is broken per se, it's just that the $$'s involved are way too low and like everything else set up in the airline's favor. There isn't any complex auction scheme that can make the likelihood of an IDB zero. What happens with a big equipment swap and 40 people have to be left behind? The easy solution is to just keep the current system with dramatically higher payouts.

Currently 4x your fare could conceivably be just a couple hundred dollars, which is clearly inadequate. Make it 4x the full walk up fare of your whole ticket, not just the segment, to a max of $10,000. This reduces the airline's incentive to just go after people on award tickets or who paid lower fares.

I also agree with an earlier poster that they should be mandated to accomodate you on the next available flight to your destination regardless of airline, whether VDB or IDB. No interline agreement? Tough cheese, better pony up for a walk up full fare on your competitor. I bet all of these interline agreements that the airlines (I'm lookin at you Delta) are so eager to discard will make a comeback.