Prize Reductions

When deciding a prize pool for a tournament organisers are often caught in a conundrum. Either lowball the prize pool and risk people not playing, or pump up the prizes in the hope it will attract enough entries to make it worth while. Bitter experience has shown me that the latter usually doesn't work, unless you're running a long established tournament with a loyal customer base.
So what happens if you come in short. Usually the organisers deal with this by advertising a prize pool based on X entries. And if X entries aren't received then the prizes can be reduced.
In Australia there are no rules about how the prizes are to be reduced. I'm assuming the prize pool gets shrunk by the amount required not to make a loss (or at least an acceptable deficit). But the USCF has a set of rules that operate for all tournaments.
For events offering more than $500 in prizes, the organisers must guarantee 50% of the prizes. Secondly the prize fund can only be reduced by the percentage of missing entries. Thirdly, no single prize can be reduced by more than this percentage.
As an example the recent Ryde-Eastwood Open advertised a prize pool of $3200 based on 70 entries. Only 50 players entered (ignoring 1 no show). So under the USCF system the organisers can reduce the prize pool to $2286 (approx 71% of the initial prizes). And all the tournament prizes can be reduced by the same amount (eg 1st prize drops from $700 to $500).

Of course this isn't the only way of dealing with this issue. A number of years ago Victorian tournaments often advertised prizes as a percentage of total entries (eg 1st 35% of entries). The problem with this that no one knew in advance what the prize pool was likely to be, and so many players decided not to take the risk ("Just play chess for the fun of it? Never!"). Consequently tournaments using this prize structure struggled to attract numbers.
Another approach (used in the 2000-01 Australian Open) is to advertise a minimum guaranteed prize list, and a larger prize list based on X entries. Even then the tournament fell far short of the X entries required and only paid out the guaranteed prize list. Consequently it hasn't been tried again.
The Doeberl Cup tries for a happy medium of always guaranteeing first place and awarding other prizes dependent upon entries (It is in fine print on all entry forms). However the Doeberl Cup also includes on the entry form the statement that all advertised prizes have always been paid out. So while the organisers have the discretion to reduce prizes they have never done so.
But the real problem for organisers that while reducing an advertised prize list may avoid a financial loss, and keep the tournament running for another year, it is likely to also reduce the number of entries for next year as well.