Okay, we have 8 players in a division; #1 promotes, #8 demotes.
I think #2 should play a match vs #7 of the division above him for promotion/demotion.
You could have #3 play #6, this way you have more chances to move up or down.
This is slightly different from Stef's proposal in that 5 can't get demoted anymore, I think it's a bit silly that you could get demoted if you end up about halfway in your division. 4 has 3 above him and 5 has 3 below him, nothing wrong with that. The incentive for #4 and #5 are of course to get either 3rd or NOT 6th. But sometimes you will still have games that don't matter at the end, there's nothing wrong with that though.
This does not work with the proposed structure, the tiers are like this:
A
B B
C C C C
etc. There are two #2s vying for a spot in the higher division. That is why Stef's proposal always has more possible demotions than promotions per division, promotions/demotions aren't symmetric.
Oh, right, somehow I missed that.
In that case I would just pit #2's from B against #6 and #7 from A.
This means that #3 to #5 from division B downwards are done at the end, but I don't think that's wrong or that there need to be more matches at the end. This isn't a TV sport where we need more matches to bring in more money.
I mean, if you're going to the trouble to compete, you're also likely to try your best and play for the highest possible spot. And if not, well no one's stopping you from trying out a wacky strategy in your final game.
If I'm going to end up 3rd, I'm not going to be bothered by the fact that I can't promote.
My main incentive for competing would be that I get to play interesting matches at roughly my own level and if my play gets me 3rd, well, I guess that's the division I belong in.
This only differs from Stef's original plan in that #7 doesn't demote directly.