Your implied point about expected utility is way off but...
Suppose someone offers you a (single trial) gamble A in which you stand to gain 100k dollars with probability 0.99 and stand to lose 100M dollars with probability 0.01. Even though expectation is −98999000 dollars, you should still take the gamble since the probability of winning on a single trial is very high − 0.99 to be exact.
I would take it. I will probably gain $100k and if I lose $100M then I will just declare bankruptcy. This is approximately the decision banks make when they take irresponsible risks and can be expected to be bailed out by similarly irresponsible government.
Your implied point about expected utility is way off but...
I would take it. I will probably gain $100k and if I lose $100M then I will just declare bankruptcy. This is approximately the decision banks make when they take irresponsible risks and can be expected to be bailed out by similarly irresponsible government.