US Jewish academic Alvin Roth has won the 2012 Nobel Prize for economics along with Lloyd Shapley, whose theories on resource allocation he developed.

The prestigious prize was awarded for their work on the “theory of stable allocations and practice of market design".

The theory is concerned with the best way of allocating resources where the traditional market mechanism is not expected to work, for example matching doctors to hospitals or children to schools.

Mr Shapley first developed the theory in relation to matchmaking in relationships. The groundbreaking research was later used by Mr Roth, 60, to match kidneys with recipients in a scheme that has been described as saving lives.

Mr Roth is a professor at Harvard Business School and currently a visiting professor at Stanford University. He was previously a visiting professor at the Technion Insitute in Haifa and Hebrew University. Although not Jewish, Mr Shapley also has strong ties to Israel: he received an honorary doctorate from Hebrew University and has worked closely with Israeli Nobel Prize Laureate Robert Auman.

The two will share the $1.2m prize.