Abstract
This paper aims to elucidate the characteristics of risk aversion by an economic experiment in which subjects sell and buy lotteries. Our experiment is unique in using the elderlies and the employed as subjects instead of students. Main conclusions are summarized as follows: First, subjects who face higher win probabilities display more risk averse behavior. Second, there is no stable relationship between attributes of the subjects such as holding assets and income and their degree of risk aversion. Third, winning prizes of the lotteries significantly lowers risk aversion. Specifically, if the obtained amount becomes double, the absolute risk aversion decreased to the half of the former level. Fourth, risk aversion obtained in the experiment correlates with various types of measures of risk aversion elicited by a questionnaire survey conducted immediately after the experiment. Fifth, there exists stable relationship that those who show higher risk aversion exhibit lower time discount rate.
