What I’m saying is that you’ve grasped how risk aversion is traditionally modelled: though the gain in terms of units is the same as the loss, the consequences of losing are much worse than the consequences of winning (ie being homeless versus owning a second home).
My point is that if you use that model to explain why people turn down small bets (50-50 on winning $55, losing $50 when the people are reasonably well off), then the model predicts stupidly risk aversive behaviour for larger bets, that don’t correspond to what people do in practice.
What I’m saying is that you’ve grasped how risk aversion is traditionally modelled: though the gain in terms of units is the same as the loss, the consequences of losing are much worse than the consequences of winning (ie being homeless versus owning a second home).
My point is that if you use that model to explain why people turn down small bets (50-50 on winning $55, losing $50 when the people are reasonably well off), then the model predicts stupidly risk aversive behaviour for larger bets, that don’t correspond to what people do in practice.