In game, I always kill them. They never actually give up, they just recover for a moment and then get up to continue the fight. I'm not going to run somewhere else on the map just to "accept" their yield. If it was a situation where they actually responded, where I could accept their surrender, then more often than not I would.
Relevant mod: http://www.nexusmods.com/skyrim/mods/11932/?
It depends on the character. What I would personally do? Incapacitate the bandit, I don't trust him. But if I, say, break his legs or something like that, he might come back for revenge... So there is a chance that I'd just kill him.
Of course, I would only do those things if I had seen or knew about what kind of stuff said bandit used to do. If he stole things from people, and the option to have him arrested was unavailable, I'd break his fingers. If he was a worse kind of criminal, there would be no place for mercy;
I Prefer this one: Fight or Flight
Then I usually steal their weapon and tell them to run away. Depending on how I'm feeling, I might shoot them in the back as they flee.