Summary: the problem with Pascal's Mugging arguments is that, intuitively, some probabilities are just too small to care about. There might be a principled reason for ignoring some probabilities, namely that they violate an implicit assumption behind expected utility theory. This suggests a possible approach for formally defining a "probability small enough to ignore", though there's still a bit of arbitrariness in it.
It's weird, but it's not quite the same as bounded utility (though it looks pretty similar). In particular, there's still a point in saying it has double the utility even though you sometimes won't accept it at half the utility. Note the caveat "sometimes": at other times, you will accept it.
Suppose event X has utility U(X) = 2 U(Y). Normally, you'll accept it instead of Y at anything over half the probability. But if you reduce the probabilities of both* events enough, that changes. If you simply had a bound on utility, you would get a different behavior: you'd always accept X and over half the probability of Y for any P(Y), unless the utility of Y was too high. These behaviors are both fairly weird (except in the universe where there's no possible construction of an outcome with double the utility of Y, or the universe where you can't construct a sufficiently low probability for some reason), but they're not the same.
Ok. This is mathematically correct, except that bounded utility means that if U(Y) is too high, U(X) cannot have a double utility, which means that the behavior is not so weird anymore. So in this case my question is why Kaj suggests his proposal instead of using bounded utility. Bounded utility will preserve the thing he seems to be mainly interested in, namely not accepting bets with extremely low probabilities, at least under normal circumstances, and it can preserve the order of our preferences (because even if utility is bounded, there are an infinite... (read more)