the observation that when we make a risky decision and weigh the different possibilities, how we feel about each outcome, not just its value (even if it is money), is what matters. In most situations, economists, like Bernoulli, assume we place less value on money as we get more of it. One thousand dollars is nothing to a millionaire, but it is serious money for someone on welfare. This diminishing utility of money explains why people are risk averse. They prefer certainty to a risk.
