There's two basic models to use for allowing increased risk:
1. The one you describe - where those willing to risk over 1% only get 'extra' action on bets exceeding 1% of all capital.
2. Allocating ALL bets based on ALL risked capital - so those who risk more get a bigger slice all the time.
There are indeed. Do we fill 1% of everyone's capital before allocating the remaining risk to those prepared to accept it (1), or do we allocate the risk in proportion to the amount people are willing to risk (2)?
It strikes me that (2) results in those sensible enough to use a sane bankroll management strategy getting very little action as the wild "risk it all" guys soak up nearly everything.
For the sake of stability in the max-profit offered to players, (1) seems like the way to go to me, only using the excess capacity offered by riskier investors as it is needed.
Thoughts?