Discussion
What is risk aversion in utility terms?
Answer: C
Concavity means each additional unit is worth less than the last, so a certain amount is preferred to a gamble of equal expected value. That is how attitude to risk is expressed without abandoning expected utility maximisation. Outcome counts, refusal and probability distortion are different phenomena, the last being a documented human tendency rather than a modelling device. Absorbing an apparent departure from a theory into the shape of one of its functions is a move that preserves the theory's structure.
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