Virtualization of resources on the cloud offers a scalable means of consuming services beyond the capabilities of small systems. In a cloud that offers infrastructure like CPU, memory, hard-disk, etc., a coalition of virtual machines formed by grouping two or more may be needed. Economical management of cloud resources needs allocation strategies with minimum wastage, while configuring services ahead of actual requests. We propose a resource allocation mechanism for machines on the cloud, based on the principles of coalition formation and the uncertainty principle of game theory. We compare the results of applying this mechanism with existing resource allocation methods that have been deployed on the cloud. We also show that this method of resource allocation by coalition formation of the machines on the cloud leads not only to better resource utilization but also higher request satisfaction.