I've seen some voting systems include a "delegation" feature, where instead of submitting a full ranking of candidates (or whatever), you can just vote for a single candidate and your full ballot will be determined by their full ballot. What you're describing seems to be basically IRV but where you are forced to delegate?

(OK, I guess the runoff isn't truly instant, but still.)

I worry that this might have the same sort of monotonicity problems as IRV normally does, only in terms of the candidates' ballots instead of the voters'.