INSTITUTE OF MATHEMATICAL ECONOMICS

Joachim Rosenmüller Peter Sudhölter

Working-Paper No. 320

November 2000

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 or the Shapley value tend to favour the short side of the market excessively.
Following a paper of HART we argue that the formation of cartels should be explained endogenously. Accordingly, we exhibit a solution concept which not only predicts cartelization but also explains the profits of the long side by its preventive power. This concept is the modified nucleolus or modiclus.

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