Originally Posted by
erlich
Exactly. The reason why no caps (and hence no IDB's) is the right solution, aside from the obvious angle of freedom from violence (broadly defined), is that it forces the right allocation and pricing. Say VDB gets too "expensive," then the airlines will adjust accordingly their planning and other backup alternatives. You give rational agents any form of "out" then you are simply introducing perverse incentives that ultimately lead to, as we see, grossly unwelcome results.
I would note that, in practice, any scenario in which the VDB price gets extremely high, say into the $5000-10000 range, would likely have an extremely high number of people who absolutely have to get where the flight is going and have schedules which cannot change. Said flight would also be likely to have a lot of pax who paid for full fare tickets, and would be turning a huge profit anyway. The airline would be able to afford to pay large amounts of VDB compensation in such a scenario.