Abstract：China is developing its water rights drawing system based on water trading which is an important method to optimize allocations through the market mechanism. This article describes the mathematical model for pooled water trading and analyzes trader bidding behavior in the market. The trader income is also calculated based on balancing the trading risk and benefit. The best bidding strategy is selected to give the optimal income. Split bidding was also analyzed to show that split bidding increases the trader income. Furthermore, the effect of information transparency was also studied by solving for the game equilibrium between buyers with the result showing that increasing information disclosure improves the price discovery effectiveness in the market.
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