The password is never 'shared', encrypted or not. Instead, both the client (Station) and the AP have to prove to each other that they already know the password (shared key).
From the Wikipedia article:
> The four-way handshake is designed so that the access point (or authenticator) and wireless client (or supplicant) can independently prove to each other that they know the PSK/PMK, without ever disclosing the key.
[1]https://news.ycombinator.com/item?id=27140251
[2]https://news.ycombinator.com/item?id=27121918