This is basically what I do, I'll work with bandits sometimes, but for the most part I only kill people I've seen kill others (Or have a bandit skin), or kill when I feel threatened (Verbally, by them looking at me, better gun, and stuff like that). Occasionally if I'm MASSIVELY out-geared by someone I'll kill them for the loot jump, but that's not very often. I do try to be friendly a lot of the time, but you can't let that let someone else get the upper hand on you.