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Caspian comments on Risk aversion vs. concave utility function - Less Wrong

1 Post author: dvasya 31 January 2012 06:25AM

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Comment author: Caspian 31 January 2012 02:35:36PM 1 point [-]

See also: Diminishing marginal utility of wealth cannot explain risk aversion. Which I found in the comment here: http://lesswrong.com/lw/15f/misleading_the_witness/11ad but I think I read in another thread on lesswrong which I can't find at the moment

Comment author: [deleted] 31 January 2012 05:03:57PM *  0 points [-]
  1. As for me, one of the main reasons I wouldn't take a bet winning $110 or losing $100 is that I would take the existence of someone willing to offer such a bet as evidence that there's something about the coin to be flipped that they know and I don't; if such a bet was implemented in a way that's very hard for either partner to game (e.g. getting one random bit from random.org with both of us looking at the computer) I'd likely take it, but I don't anticipate being offered such a bet in the foreseeable future.

  2. I think some of the refused bets on the right-hand column of the table on Page 3 of that paper are not as absurd as Rabin thinks -- Eliezer (IIRC) pointed out that there are quite a few people who would choose a 100% chance of receiving $500 to a 10% chance of receiving $1 million. (I'm not sure whether I'd accept some of those bets myself.)

This is not to say that human preferences can always be described by a utility function (see the Allais paradox), but I don't think Rabin's is sufficient evidence that they don't.

Comment author: thomblake 31 January 2012 05:24:33PM 0 points [-]

As for me, one of the main reasons I wouldn't take a bet winning $110 or losing $100 is that I would take the existence of someone willing to offer such a bet as evidence that there's something about the coin to be flipped that they know and I don't

This seems to follow the no-trade theorem for zero-sum games.