The point is that not everyone would switch off at the same time. Furthermore, those who accept a lower fee only have to do half the work, so they are 2x as likely to win the block. No need to coordinate anything, each player could choose which is better for them: reduced inflation or increased mining payout. Those with large holdings and small hash power would want reduced inflation. Everyone else would want increased mining payout.
I don't understand. If you set blocks to 12.5 a piece and halved the difficulty, blocks would be solved twice as fast and the bitcoin generation rate would remain essentially unchanged. There would be no reduction in inflation.
There would be 'two' difficulty levels, one exactly half of the other. The highest difficulty level would adjust until the block generation rate was every 10 minutes regardless of the mining reward.
If you accepted half of award, you would be able to submit a block at the 50% difficulty level. If everyone moved to half the block reward then you would still get 1 block every 10 minutes at what ever difficultly level exists based upon competition of miners for 12.5 vs 25.
Additionally, even if inflation actually is reduced by your plan, who cares? More than half of all the bitcoins that were ever in existence have been created, and a portion of those have been and will be lost due to data destruction. And the creation of bitcoins is constant, so people know exactly what the supply will be like in the future and price this into their value. Plus bitcoin creation will basically slow to a trickle by 2017 or 2021. Even if all 21 million bitcoins were suddenly mined today, supply of bitcoins would less than double we'd expect bitcoins to remain above $50. I guess that's something, but this is spread out across many years and inflation of the Bitcoin money supply will soon be less than any other fiat currency.
The point of this discussion isn't for bitcoin per-say but for the theory of crypto-currency rewards with an eye toward adding value to chains. If the market can adjust the amount of effort put into mining based upon the need for security rather than some arbitrary 'fixed price' level of security then you could balance the investment in hashing power against other kinds of investment because there is no algorithm paying insane amounts of money for every block produced.