Stockholm: Daniel Kahneman, a citizen of both Israel and the United States, and Vernon L Smith of the US were on October 9 awarded the 2002 Nobel Economics Prize for innovative work in the fields of psychological and experimental economics.

Kahneman, a psychologist, was lauded for having "integrated insights from psychological research into economic science", while Smith was honoured for having "established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms".

Kahneman laid the foundation for a new field of research, the jury said. The first Israeli to win the prestigious prize, he has demonstrated how human decisions may systematically depart from those predicted by standard economic theory.

"Kahneman has thus demonstrated that in situations with uncertainty, human judgment often exploits rules of thumb which systematically contradict fundamental propositions in probability theory," the jury said.

Smith's work has focused on the role of auctions, which are traditionally used to organise markets for raw materials or financial instruments, and more recently, for deregulation and privatisation of public monopolies such as broadcasting rights.

Smith has also evaluated different mechanisms for allocating airport time slots using computer-assisted markets.