Shapley, who shared the 2012 Nobel Prize in economics, has died at 92 at a nursing home in Arizona, his son says. He spent many years researching a form of strategy decision-making known as game theory.
The RAND Corp think tank, where Shapley worked as a research mathematician for decades, confirmed he died on Sunday. His health had declined due to complications from breaking a hip several weeks ago, his son Peter told "The Washington Post."
A major contributor to theoretical and mathematical economics, Shapley was regarded by many experts as the embodiment of game theory, the study of behavioral relations between intelligent, rational decision makers.
In the 1950s, the novel branch of mathematics was being pioneered by his Princeton contemporary and the 1994 Nobel laureate, John Nash, who was depicted in the 2001 film "A Beautiful Mind."
While Nash concentrated on non-cooperational games, like where two suspects must decide whether to inform on each other during interrogation, Shapley focused on developing theories of cooperational games, where consensus decision-making is used.
Later, Shapley went on to share the 2012 Nobel Prize for Economics with Alvin Roth, who teaches economics at Harvard and Stanford.
Shapley came up with formulas to match supply and demand in markets where prices don't do the job, while Roth put Shapley's math to work in the real world.
The pair studied the match-making that takes place when doctors are coupled with hospitals, students with schools, and human organs with transplant recipients.
"Professor Shapley was one of the giants of game theory," said Gene Block, chancellor of UCLA, where Shapley worked for many years as a professor.
"His work in market design laid the foundation for advances in the matching of kidney donors with transplant recipients, in college admissions procedures, and in assignment of children to public schools. The entire UCLA community joins Professor Shapley's family in mourning his passing."
Shapley was surprised by the award by the Nobel committee to someone with no formal economics training.
"I consider myself a mathematician, and the award is for economics," Shapley told The Associated Press after learning of the honor. "I never, never in my life took a course in economics."
The son of renowned astronomer Harlow Shapley, who helped estimate the size of the Milky Way galaxy, Shapley noted: "Now, I'm ahead of my father. He got other prizes...but he did not get a Nobel Prize."
Another concept he developed in 1953, the "Shapley Value," remains the subject of much academic discussion.
The system provides a method for uniquely valuing the contribution of each individual to a group where the value of the whole is greater than the sum of its parts.
Dedicated to problem solving
Born in Cambridge, Massachusetts in 1923, Shapley was drafted into the military at age 20, while studying at Harvard.
While serving in the Army Air Forces in China, he received the Bronze Star for breaking a Soviet weather code.
After the war, Shapley returned to Harvard, graduating with a bachelor's degree in mathematics before moving to Princeton University to complete his doctorate.
He was, until his passing, a professor emeritus of economics and mathematics at the University of California, Los Angeles. Before that, he spent 27 years as a research mathematician at RAND.
Shapley is survived by two sons, Peter and Christopher, and their families.