Conversly, if you'd pay much more than this, you are absurdly risk averse: Here's a pdf of a classic paper by Rabin: Risk Aversion and Expected-Utility Theory: A Calibration Theorem
Abstract:
Within the expected-utility framework, the only explanation for risk aversion is that the utility function for wealth is concave: A person has lower marginal utility for additional wealth when she is wealthy than when she is poor. This paper provides a theorem showing that expected-utility theory is an utterly implausible explanation for apprecia- ble risk aversion over modest stakes: Within expected-utility theory, for any concave utility function, even very little risk aversion over modest stakes implies an absurd degree of risk aversion over large stakes. Illustrative calibrations are provided
This seems to make an unwarranted assumption about exactly how the marginal utility diminishes.
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