In this report in the Times of India, US reduces reward on Bin Laden, we see the strangest manifestation of the backward bending demand curve I have ever seen!
Update: As a couple people have ask me to simply explain what a ‘backward bending demand curve’ is, it is a strange and counter intuitive phenomenon in which sometimes as a product gets cheaper, people buy less of it or if a product gets more expensive, they buy more of it. This does not seem to make sense but it does occasionally happen.
Example 1: A high price designer ‘name label’ dress is offered at a reduced price… still out of reach of the ‘woman in the street’ buyer. Paradoxically the high end target market buy less of the dresses, presumably because the reduced price indicates it is probably ‘last years design’ (even if not true, the price is used as the primary source of information by the potential purchaser as to ‘what is hot’).
Example 2: Soviet made wristwatches, made to uncharacteristically high quality and standards were marketed in Britain in the early 1970’s. They were every bit as good as other high quality wristwatches available at the time but were almost half the price. Even though Soviet products were a relative rarity in the UK, British buyers stayed away in droves, presumably taking the view that any watch that cheap had to be complete rubbish. The Soviets were baffled but on advice from a British consultant raised the price to just below the typical UK price and they stared to sell.
Thus, the US is lowering the price on the head on Osama bin Laden in the hope the new level of reward is something rural Afghans can actually relate to in the real world. In each case the specifics are different but price is just a form of information and sometimes if the price of something is unexpectedly high or low, the effects is the opposite of what one might normally expect. That is what I mean by a ‘backward bending demand curve’!
Also on reflection, I was thinking of this in terms of the US doing the ‘selling’ of an outsourced service here (terrorist removal)… but I suppose one could argue that this is a backward bending supply curve: the US is offering money in the hope some impoverished Afghan will ‘supply’ a dead or bound-hand-and-foot Osama bin Laden 
