My tournament association does brackets. We keep the $5 per bracket in the organization bank account to help defray expenses. Also - the computer RANDOMLY generates every match, so it stays pretty fair.
When we have a bye in a bracket, we just don't take the $5 off the top.
The brackets on Tuesday are ones I don't get into any more. They're run manually by the wife of one of the bowlers. Although I think she tries to keep it fairly random, she does the drawing/assigning of spots herself, and I got really tired of entering 2 brackets every week, and ALWAYS hitting the same player in the second game.
Never failed. Week after week, in BOTH brackets, I'd be up against one of the highest 2 averages in the league. I just don't particpate in those any more.
On my wed league, one of the bowlers runs the brackets on the side, because he LOVES the numbers. He has an incredibly numbers-oriented brain, and he'd do brackets for no money just to watch the numbers. He takes the $5 "rake" and puts it in an 'end of year' pot that is paid out on a point system that only he understands. I got back $50 extra bucks at the banquet last year - I didn't expect it, so it was pretty nice. He has the bowlers draw numbers - if there are 8 brackets for the night, you'll draw 1-64. Although not foolproof, it's pretty good.