I agree with all those who say that IDB needs to be effectively eliminated. Airlines get the upside of overbooking, so they should have to bear the downside risk as well. In particular, I think they get away with a lot by only offering vouchers for volunteers and the cash payment for IDB is only 4x the fare paid (which others have mentioned may be extremely small as it is calculated on segment basis).

My proposal is that at some defined point in time (say, within 15 minutes of scheduled departure) if there are not enough volunteers the airline should be required to offer cash payments rather than vouchers/miles, and should be required to increase the cash offer until they get enough volunteers. If you are worried about situations where the bidding gets excessive, you could put a cap of say 4x the highest fare paid by any passenger on the plane (in which case IDB would still exist but it would be much rarer, because this would probably let the bidding get up to $5000 on most domestic flights).

In addition, a couple more ways to make IDB more fair would be to require IDBed passengers to be placed on the next flight on the same carrier (even if that means overbooking the next flight), or if no flight on the same carrier is within 12 hours, to be placed on the next flight on another carrier provided seats are available for purchase.

Neither of these proposals require drastic change to the system. They make overbooking slightly less lucrative but given the current profits I don't see why passengers shouldn't be treated fairly.