It makes no sense.

Or just only decrease Combat.

Neither does the fact that we don't stay dead. I vote to increase it to 5%.

I personally wouldn't mind if we had to pay a fee proportional to our total levels for dying in order to respawn. Might make death a bit dicier for more experienced players. Could be linear or exponential.

We don't need more incentive to run away and be afraid of death, we have enough of those people already.

Since you have to work a bit at getting a bounty in the first place we could just call it a hazard of the lifestyle. There is also the habit some players have of constantly starting new characters to consider as well as the increased effect this mechanic has on older characters.

Getting a bounty on you should carry some sort of penalty in my opinion but it should not become so large that it makes playing unfun.

Perhaps players could be offered a chance to pay restitution of 10 - 20 million or lose 2 percent with a 2000 xp cap on the maximum amount lost per license.

Restitution could be set as 10 times the amount of the bounty or made equal to the damages if that could be tracked....

I see no reason why the damages couldn't be tracked

Yeah, and they should be tracked so that a list of offenses can be included in the bounty announcement and report. So instead of "Joe Bounty Hunter killed Bob Pirate! Yay!" it can say "By killing Bob Pirate, Joe Bounty Hunter has avenged the deaths of Stevie McNewbcakes, *Marshall Ben Loserface, and *SMV Nemesis!"

As for bounties making people run a little bit more - so? Bounty hunters should have to hunt - the quarry doesn't normally just present himself on a platter. Only naughty people and nationalists should have bounties in the first place, and a person who does the sorts of things that earn bounties is automatically less likely to run from a fight.

I don't see any problem with the 1% XP loss due to a bounty on your head being claimed.
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Don't see much of a point in making combat less significant.

Keep as-is, and add a 1% decrease in stats for any bounty hunter killed by a player with an active bounty.

Or! How about the bounty come from the players' personal balance?

Thats not even how it works...