By bounding utility, you also enforce diminishing marginal utility to a much greater degree than most people claim to experience it. If one good thing is utility 0.5, a second good thing must be less than 0.5, and a third good thing pretty much is worthless.
If utility is bounded between −1 and 1, then 0.5 is an extremely large amount of utility, not just some generic good thing. Bounded utility functions do not contradict common sense beliefs about how diminishing marginal returns works.
If utility is bounded between −1 and 1, then 0.5 is an extremely large amount of utility, not just some generic good thing. Bounded utility functions do not contradict common sense beliefs about how diminishing marginal returns works.