Apologies, I should have made my statement clearer. The emphasis is not that builders collude with each other builder, but rather each individual builder is incentivized to collude with the proposer by running private bids. It’s game theoretically optimal for each individual builder to do so, as you maintain timeliness while obscuring your payload base fee floor to the outside attesters (this reduces the potential payload base fee floor). Additionally, as more individual builders elect to privately bid, they all share the same benefit of an even lower payload base fee floor. (Edit, previously: Additionally, once each individual builder elects to…)
If the payload base fee floor is lowered due to obscuring the skilled bids, naturally the builder can bid marginally more (ex: half of recovered base fee) payload tip to the proposer - making it game theoretically optimal for the proposer to accept private bids. From the outside, this looks like all builders are colluding amongst each other as well as with the proposer — but in reality it’s just optimal for all builder-proposer relationships to do this on an individual basis and it scales in effectiveness as more builders participate. And the end result is heavily suppressed payload base fee floors. The only party who would intentionally defect from this structure would be an unconfident builder who wants to redistribute as much as they can (but as mentioned before, if they’re unconfident, they’re likely not skilled enough to capture much of the MEV spike anyways. So still suppressed payload base fee floor).
All this to say that it if private bidding is possible, it seems this proposal is effective at burning easy, low-skill MEV, but is ineffective at burning anything outside of that set.