What’s the difference between a doctor and a gunman? http://uchicagolaw.typepad.com/beckerposner/2010/03/the-health-care-bill-progress-or-retrogression-becker.html
A polite man walks up to you and pulls a gun to your head. Calmly and rationally he explains that he wants some money, and unless you give him a sufficient amount he will kill you. Since you’re in a capitalist society, murder is legal. However, he must stay good to his word and not shoot you once you hand over the cash. If you have dependants, the gunman will instead shoot them, but still ask you for the money. The question is, how much money should the gunman ask for, and how much should you offer?
The gunman wants to maximise his intake without asking for too much. If you can only afford to pay him 5 cents, then he’d prefer to take that than waste a bullet. Similarly, if you can afford $1,000,000, then the gunman would rather take that. Basically, he’ll take whatever it takes to not shoot you (or your dependant) in the face. However, assume that the gunman is an acute businessman, and spends all day pointing guns to people’s faces. He will then shoot some people in order to improve his metrics.