Note that the standard explanation for risk-aversion just is diminishing marginal utility (where utility is defined in the decision-theoretic sense, rather than the hedonic sense). However, Matt Rabin pretty convincingly demolishes this in his paper Diminishing marginal utility of wealth cannot explain risk aversion.
Note that the standard explanation for risk-aversion just is diminishing marginal utility (where utility is defined in the decision-theoretic sense, rather than the hedonic sense). However, Matt Rabin pretty convincingly demolishes this in his paper Diminishing marginal utility of wealth cannot explain risk aversion.