Cartels via the modiclus

Abstract

We discuss market games or linear production games with finite sets of players. The representing distributions of initial assignments are assumed to have disjoint carriers. Thus, the agents decompose into finitely many disjoint groups each of which hold a corner of the market. In such a market traditional solution concepts like the core tend to favor the short side of the market excessively. We exhibit a solution concept which is more sensitive with respect to the preventive power of the long side. Thereby, profits of the long side are now feasible. This concept is the modified nucleolus or modiclus. Within certain limits, it predicts cartelization and assigns a “fair share” for cartels on the long side of the market. Also, it organizes the internal distribution for a specific cartel according to the “contested garment solution” of Aumann–Maschler.