Do the Federal regulations prevent airlines from excessively overbooking their flights? If not, why do the sell out a flight rather than just continuing to raise the price?

With the bump/compensation policies that they have, wouldn't it make economic sense to sell a passenger a ticket for $1,000 if you can bump someone else and give them a $300 voucher - you're still $700 to the good. You would think that the programmers would be able to pretty easily monitor load factors and average revenue per seat to properly price tickets once every seat is full so that you're always getting more money - net of bump vouchers - when a new ticket is sold.

It seems this would be a win-win-win situation. The desperate passenger would win because he could still get a seat on an otherwise full flight as long as he was willing to pay the market price. The airline would win because they would generate more revenue. The bumped passenger would win because of the "free" money from the bumpt voucher. In my experience, it seems there are always plenty of volunteers available for a bump, so I wouldn't see a lot of involuntary bumps. Worst case scenario would be selling seats at the last minute for $2,000 and then needing 30+ volunteers that you could give $1,500 vouchers to. You're going to get a ton of volunteers for $1,500 in vouchers.