2) The blocks from both the attacker and honest miners build on top of each other in a single chain. In this this situation the honest miners include all transactions skipped by the attacker, and the attack fails.
Obviously the attacker will not do that. It will ignore all blocks that the orthodox miners put out, and continue mining empty blocks using
his last mined block as the parent. Since the attacker has more power than the orthodox miners, his empty chain will eventually outpace every orthodox side branch, and all the orthodox blocks in the latter will then be orphaned and discarded
by all the orthodox clients.
Thus, every transaction request that the orthodox clients issue will either stay unconfirmed forever, or become unconfirmed even after having been confirmed several times. Whereas the clients who upgrade to the cartel's version will not notice any difference.
Provided SideChain are not introduced the cost to mine empty blocks becomes prohibitive, and can approach infinity, the incentive system as is rewards corporation.
At the moment you would need to spend around 150MWh to block transactions every 10 minutes.