I don’t think that follows. The risk-aversion utility attaches to the choice, not the outcome: I get extra utility for having made a choice with lower expected variance, not for one of the outcomes. If you then offer me a choice between choices, then sure, there will be more risk aversion, but I don’t think it’s viciously recursive.
I don’t think that follows. The risk-aversion utility attaches to the choice, not the outcome: I get extra utility for having made a choice with lower expected variance, not for one of the outcomes. If you then offer me a choice between choices, then sure, there will be more risk aversion, but I don’t think it’s viciously recursive.