It's the other way around, "any risk is bad" and "marginal utility is decreasing" are conclusions that you reach from your own function, not that drive your function.

* Would you give $1 for a 1% chance of winning $100?

* Would you give $1 for a 1.1% chance of winning $100?

* Would you give $1 for a 1.2% chance of winning $100?

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* Would you give $1 for a 10% chance of winning $100?