So in other words, people's actual behaviour does not fit a (particular) simple mathematical rational model? Why is this surprising to anyone? Non-linear utility is a rationalisation and broad justification of risk aversion, but are there really people who think it's an accurate descriptive model of actual human behaviour? The whole concept of trying to fit a rational model to human behaviour seems pretty optimistic to me.

I also take issue with this quote: "[expected utility maximisation is] a completely ridiculous model of human risk aversion on small bets" You've shown that only by extrapolating behaviour on small bets to behaviour on large bets. To me that's similar to saying "Newtonian mechanics is a completely ridiculous model of ordinary scale physics" by extrapolating its behaviour to relativistic scales. Whether it's a good model on small bets is a function of its behaviour on small bets, not its extrapolated behaviour on large bets. I know I at least would use a completely different mindset on large bets than I would on small anyway, and would make no claim of the two being consistent under any single model.

That said, I agree with the conclusion if not the method. I would if anything be more risk averse on large bets not less. Risk aversion on small bets seems irrational to me in the first place. Utility should be approximately linear at small scales. Then again, I would take the 50-50 chance at $55 over $50 in the first place so maybe I'm not the sort of person you're talking about.