Mr Daniel Kahneman and Mr Vernon Smith have won the 2002 Nobel economics prize for research on how psychology affects people's buying decisions and for developing laboratory experiments in economics.
The Royal Swedish Academy of Sciences said the two Americans will share the $1 million prize for groundbreaking studies taking economics beyond the traditional assumption of rational human behaviour driven by self interest.
Mr Smith (75), a professor of economics and law at George Mason University in Virginia, spearheaded "wind-tunnel" tests where trials of new market designs, such as a deregulated electricity market, are carried out in a lab before being implemented in practice.
Mr Kahneman is a professor of public affairs at Princeton University and the first Israeli to win the Nobel economics prize.
He discovered how human judgment may take shortcuts that systematically depart from basic principles of probability. His work on "heuristic shortcuts", or rule of thumb decision-making, sheds light on why big moves may occur on stock markets without any obvious reason.
His work also helps explain some people's willingness to drive many miles for a few dollars' discount on a minor purchase but are reluctant to do so to save the same amount on a more expensive buy, the academy said.
