One person is willing to take $10,000? Great. Every other passenger is willing to refuse $9999 for the low price of $9999. Now, each passenger needs a 1/Nth of the payout, and that fraction needs to be >$10,000.
Now the negotiation's starting offer becomes: "You overbooked by one seat. How much will it cost you to ground the plane, or fly it empty and bump us all to other flights? Give us that much money."
Honestly, this outcome would be fine by me, since it would correct poor airline behavior pretty rapidly. They already let you buy standby tickets; overbooking is double dipping.
1) "Come on, you can't get 100 people to collude." vs
2) "There is a law that ensures our per-passenger liability saturates at $1350 plus re-booking costs."
For similar reasons, they insure against a hundred different possibilities and require low-personal-judgment protocols to comply with the policy terms.
That only leaves a) a law saturating the liability, or b) a contractual provision (and law validating such provisions) that saturates the liability. It still would explicitly prevent the possibility of colluders extracting an unbounded amount to be bumped.
Obviously it is more efficient for everyone if this bidding is done before you get to the airport, the system described in the article is one example.
aka collective bargaining, which in principle should be encouraged, to counter power imbalances.
https://en.wikipedia.org/wiki/The_Logic_of_Collective_Action
Where it becomes a problem is when the airline decides they don't want to pay "too much" and start bumping people involuntarily. That should be illegal. If a flight is oversold and nobody will accept being bumped for less than $10,000, then the airline should have to pay $10,000 to resolve the situation.
As it stands right now, the whole thing is skewed in the airlines' favor because they have a nice, low cap on payouts.