How is risk aversion represented in a utility framework?
Answer: A
A concave utility means that each additional unit of money or reward is worth less than the last, so a certain amount is preferred to a gamble of the same expected value. That is how risk attitude enters without abandoning expected utility maximisation. Distorting probabilities, adding penalties and refusing uncertainty are ad hoc alternatives that lack the axiomatic justification. Absorbing an apparent departure from the theory into the shape of the utility function keeps the framework intact.
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