you would end up in the same spot regardless of whether you're maximizing utility or maximizing wealth.
But under conditions of uncertainty, expected utility is not a monotonic function of expected wealth.
Well, the first thing that the decision depends on is the risk aversion and there is no single right one-size-fits-all risk aversion parameter (or a function).
I'll defer to the SSC link on why I think it would be better to make one up--or rather, make up a utility function that incorporates it.
Note that the market prices risks on the bet-is-a-tiny-percentage-of-total-wealth basis.
Indeed. The case in question wasn't a market-priced risk, though, as the reward was a potential tax advantage.
But under conditions of uncertainty, expected utility is not a monotonic function of expected wealth.
Under uncertainty, you must have a risk aversion parameter -- even if you try to avoid specifying one, your choice will point to an implicit one.
You can also use the concept of the certainty equivalent to sorta side-step the uncertainty.
If it's worth saying, but not worth its own post (even in Discussion), then it goes here.
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