"Maximize your utility function, not the money, moron!"
(I'm not an economist, but I talk like one.)
http://en.wikipedia.org/wiki/Loss_aversion#Can_loss_aversion...
In fact the article you linked to says exactly that:
"All of the above effects can be expressed in terms of the utility function of money, and, in particular, not regarding money as a linear measure of utility. In other words, if money has diminishing marginal utility, then each dollar is worth less than the one before it. To use the example before, the first $1000 might be worth $1000 to a person, and the second $1000 worth only $950 (in terms of utility). This would not be "loss aversion" but just a phenomenon adequately explained by economic theory."
Anyhow, I agree marginal utility is well understood by economists, just disagree that that is the standard way dollars themselves are viewed in classic economic theory. And perhaps I over-reached when I built my straw economist.
What they miss is that dollars offer diminishing returns at scale, so the decision is rational. Going from 0 to 100,000 dollars is very different life-style wise than 3 million to 3,100,000. Because those first dollars are "worth" so much more, and because the upside of the best outcome is not worth as much proportionally, the decision is rational (although people are often being irrational in other ways in this game).
In your case, I suggest you consider your BATNA (Best Alternative to a Negotiated Agreement) and estimate their interest, then consider countering. You can only negotiate your "best deal" when you're willing to walk away. If you're not willing to walk, you play it safe and "make a deal."
Edit: Keep in mind, if you counter, the worst they can say is no, and you can often still acquiesce to their original offer.
http://en.wikipedia.org/wiki/Best_alternative_to_a_negotiate...