Note the required token amount for the collateral contract is low and independent of the required deposit tokens -- only a relatively small incentive is required to make "acting honestly" Bob's preferred choice.
So, this is basically a negligible overhead, token-wise. As a downside, it does create slightly larger transactions (another UTXO, etc.).
I read the MAD-HTLC paper and I think it actually doesn't get into the size of the collateral (v^{col}). I might have missed it though. Can you please point me to the section in the paper where the amount is discussed?
I assumed that v^{col} has to be at least the size of v^{dep}. Otherwise, Bob can threaten Alice with an HTLC bribery attack, and Alice knows that Bob has very little to lose. Bob *should* have the same amount to lose, to make it work - no?