It seems like there’s also an issue with risk aversion. In regular betting markets there are enough bets that you can win some and lose some, and the risks can average out. But if you bet substantially on x-risks, you will get only one low-probability payout. Even if you assume you’ll actually get that one (relatively large) payout, the marginal value will be greatly decreased. To avoid that problem, people will only be willing to bet small amounts on x-risks. The people betting against them, though, would be willing to make a variety of large bets (each with low payoff) and thereby carry almost no risk.
It seems like there’s also an issue with risk aversion. In regular betting markets there are enough bets that you can win some and lose some, and the risks can average out. But if you bet substantially on x-risks, you will get only one low-probability payout. Even if you assume you’ll actually get that one (relatively large) payout, the marginal value will be greatly decreased. To avoid that problem, people will only be willing to bet small amounts on x-risks. The people betting against them, though, would be willing to make a variety of large bets (each with low payoff) and thereby carry almost no risk.
Yes. And making repeated small bets drives, in practice, the expected utility to the expected value of money, while one large bet doesn’t.