I fail to understand why the search authorities apparently failed to even consider the reward system to coastal dwellers - apart from the fact that it fell into the "too-hard" basket - or that they were concerned that they would be overwhelmed with subsistence dwellers hopefully offering up every piece of flotsam found.
After seeing the dreadful amount of flotsam and jetsam on the Cocos-Keeling Islands (mostly reported coming from Indonesia), I could understand the authorities concerns in that point.
Onetrack you are giving your own - correct - explanation here. The reward you suggested (1000-5000 USD) is more than many people living on the SIO shores make per year. You'd be inundated with claims, every kettle and piece of scrap metal would have become an airplane part. What
should have been done, of course, is to make the coastal populations, especially those who are professionally engaged with the ocean (fishermen, beachcombers, etc) aware of the possibility of debris washing up. Mr Ferrier would probably not have burned suitcases and seat(s) had he been aware of the potential importance. It appears that no such alert was sent out anywhere.