Great to see the fee market instability being addressed. This proposal is strictly better than the current first price fee mechanism being used in Ethereum today.
However, this proposal does not maximize social welfare. Additionally, this proposal is missing formal proofs for the nonmanipulation claims. In practical terms, while we don’t know of a concrete attack on this mechanism right now, such miner manipulation attacks may exist and would be discovered in production.
These issues were brought up and addressed in StableFees, an alternate auction mechanism that maximizes social welfare and has provable non-manipulation guarantees. In a nutshell, StableFees starts with a generalized second price auction and then adds a few rules to provably deter misbehaviors that occur in the decentralized setting that do not occur in traditional auctions.
If you are curious to learn more, a more detailed overview of StableFees is given in this blog post: https://hackingdistributed.com/2019/01/22/doing-fees-right/. For more gory details and proofs, the full paper can be found here: https://arxiv.org/pdf/1901.06830.pdf. Note that StableFees does not rule out colluding behaviors.