Density functional theory (DFT) calculations were performed to study the nature of interaction of elemental mercury (Hg) with small palladium clusters (Pd-n, n = 16) using generalized gradient approximation method. Results of these calculations showed stronger binding of Hg with Pd2 cluster, which, therefore, was chosen for further investigation as presented in the latter part of the third section of this report. This extended study explains the binding mechanism of Hg with alloys of Pd dimers, PdM (M = Pd, Pt, Cu, Ag, Au) in neutral, cationic, and anionic states. Interaction energy of Hg with palladium dimer follows the trend Pd-2(+) > Pd-2 > Pd-2(-). For all of the above PdM complexes, the strength of Hg binding is found to be highest in their cationic states. Mixing of Pt and Au enhances the reactivity of the cationic Pd-2 dimers, decreases it for their neutral counterparts, and does not affect much in the anionic states. Natural bond orbital (NBO) analysis indicates that Hg binding takes place because of the charge transfer from its s-orbitals primarily to the d-orbitals of M atoms followed by back-donation of charges from their s-orbitals to the p-orbitals of Hg atom. Moreover, the amount of charge transfer from Hg(s)-> M(d) correlates with the Hg binding energy in Hg-PdM0,+/- complexes. Binding of Hg in cationic Hg-PdM complexes conjointly depends on energies of the lowest unoccupied molecular orbitals of the PdM+ dimers as well as NBO partial charges on adsorbed Hg.