Philip K. Dick is known as the master of paranoid writing. But what exactly are the ingredients to make a character think that he is pursued? The explanation is surprisingly easy. There are two important preconditions for telling a paranoid plot. The first one is, that the character is unable to reach an important goal. For example his goal is to walk to a city but he not able to do so. And the second aspect is, that the character should track a group of people which are called “they”. They means, that the character is trying to understand the reality, takes persons, places or ideas in his focus and builds are model of the inner working.
Let me give an example. The main character of a story is at home and likes to travel to Paris. He is attending a travel group in a train. And now the train stops at the half way and the travel group is doing something. The main character understands only the half of what the group is saying and recognize that the plan destination can't be reached. This results into a fearful situation, which means that the character is overwhelmed by the situation. As a result he becomes paranoid. That means, according to his model, the travel group is conspiring against him.
Pretty simple story line, isn't? The funny point is, that it's very easy to invent hundred of these stories with different characters and goals. The only important elements are a goal which can't be reached, and a group which is tracked but understood wrong. On top of these simple elements it is possible to produce a realistic dialogue and the overall plot which looks highly realistic. It is equal to place the maincharacter in a trap and let the environment work against him and the result is called a paranoid plot.
It is possible to explain the difference between a normal plot and a paranoid one. In a normal plot the character is able to reach his goal. That means, he plans to reach Paris and is able to do so. He starts with an optimistic world understanding and he is right. The train is on schedule, everything works great and he loves the journey. It is common, that this is combined with a successful tracking of the opponent group. That means, the character observes what the other passengers in the train are doing and they have the same world understanding than the character himself. A communication is possible.
In a paranoid plot, both assumption are hurt. That means, the ability to reach the planned goal is not there and the ability to track the opponent group isn't working. This is perceived by the readers as stressful situation.