Abstract:

After Herbert Simon, Reinhard Selten, and Daniel Kahneman, Richard Thaler became the fourth scholar winning the Nobel Memorial Prize in Economic Sciences whose research is concerned with bounded rationality. Theoretically, Thaler not only accepted and developed the framework of bounded rationality, but also contributed to the conception and development of the theory of mental accounting. In basic research, he discovered and showed the unique attributes of mental accounting, such as the endowment effect, lack of self-control and preference for fairness. In practice, he successfully explained some puzzling phenomena in the stock and fund markets, using relevant theories in human psychology; many results from his empirical studies are widely used in business management and public administration. Furthermore, Thaler advocates the “nudge” approach to policy making, trying to improve people’s well being through subtle but effective manipulations. Thaler's research has the rare and highly desirable “theory-research-application” triadic quality, and the Nobel prize rightfully reflects his contributions to the understanding of economics and human behaviors.

Key words: bounded rationality, mental accounting, self-control, fairness preference, nudge