Thanks. Just going to clarify my thoughts below.
Because doing so will lead to worse outcomes on average.
In specific instances, avoiding the negative outcome might be beneficial, but only for that instance. If you're constantly settling for less-than-optimal outcomes because they're less risky, it'll average out to less-than-optimal utility.
The terminology "non-linear valuation" seemed to me to imply some exponential valuation, or logarithmic or something; I think "subjective valuation" or "subjective utility" might be better here.
You just incorporate that straight into the utility function.
You have $100 to your name. Start with 100 utility.
Hey! Betcha $50 this coin comes up heads!
$150 and therefore 110 utility if you win.
$50 and therefore 60 utility if you lose.
So you don't take the bet. It's a fair bet dollar wise, but an unfair bet utility wise.
This is a thread where people can ask questions that they would ordinarily feel embarrassed for not knowing the answer to. The previous thread is at close to 500 comments.