This has nothing to do with interpreting probability, but with a utility function that's not linear in terms of wealth. With decreasing marginal returns to weal

This has nothing to do with interpreting probability, but with a utility function that's not linear in terms of wealth. With decreasing marginal returns to wealth, the same bet becomes less attractive at lower wealth levels. Although this can't fully explain risk aversion, see https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.15.1.219 https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.15.1.219