Bidding behavior in an optimal water trading model
ZHENG Hang1, CHEN Ben1, LIN Mu2
1. Department of Hydraulic Engineering, Tsinghua University, Beijing 100084, China;
2. School of Statistics and Mathematics, Central University of Finance and Economics, Beijing 100081, China
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.
Howe C W, Schurmeier D R, Shaw W D. Innovative approaches to water allocation: The potential for water markets[J]. Water Resources Research, 1986, 22(4): 439-445.
[2]
Vaux H J, Howitt R E. Managing water scarcity: An evaluation of interregional transfers[J]. Water Resources Research, 1984, 20(7): 785-792.
[3]
Hadjigeorgalis E, Lillywhite J. The impact of institutional constraints on the Limarí river valley water market[J]. Water Resources Research, 2004, 40, W055015.
[4]
Brooks R, Harris E. Efficiency gains from water markets: Empirical analysis of watermove in Australia[J]. Agricultural Water Management, 2008, 95(4): 391-399.
[5]
Bekchanov M, Bhaduri A, Ringler C. Potential gains from water rights trading in the Aral Sea Basin[J]. Agricultural Water Management, 2015, 152: 41-56.
[6]
刘佳骏, 董锁成, 李泽红. 中国水资源承载力综合评价研究[J]. 自然资源学报, 2011, 26(2): 258-269.LIU Jiajun, DONG Suocheng, LI Zehong. Comprehensive evaluation of China's water resources carrying capacity[J]. Journal of Natural Resources, 2011, 26(2): 258-269. (in Chinese)
[7]
Speed R, Sun X T, Speed R, et al. Transferring and trading water rights in the People's Republic of China[J]. International Journal of Water Resources Development, 2009, 25(2): 269-281.
[8]
汪恕诚. 水权和水市场——谈实现水资源优化配置的经济手段[J]. 中国水利, 2000(11): 6-9. WANG Shucheng. Water right and water market—— Economic measures to realize optimal configuration of water resources[J]. China Water Resources, 2000(11): 6-9. (in Chinese)
[9]
Moore S M. The development of water markets in China: Progress, peril, and prospects[J]. Water Policy, 2015, 17(2): 253-267.
[10]
李海红, 王光谦. 水权交易中的水价估算[J]. 清华大学学报(自然科学版), 2005, 45(6): 768-771.LI Haihong, WANG Guangqian. Water price estimates in water right trading[J]. Journal of Tsinghua University(Science and TechnoLogy), 2005, 45(6): 768-771. (in Chinese)
[11]
Luckmann J, Flaig D, Grethe H, et al. Modelling sectorally differentiated water prices-water preservation and welfare gains through price reform?[J]. Water Resources Management, 2016, 30(7): 2327-2342.
[12]
Zaman A M, Malano H M, Davidson B. An integrated water trading-allocation model, applied to a water market in Australia[J]. Agricultural Water Management, 2009, 96(1): 149-159.
[13]
Khan S, Dassanayake D, Mushtaq S, et al. Predicting water allocations and trading prices to assist water markets[J]. Irrigation & Drainage, 2010, 59(4): 388-403.
[14]
Reddy S M W, Mcdonald R I, Maas A S, et al. Industrialized watersheds have elevated water risk and limited opportunities to mitigate risk through water trading[J]. Water Resources & Industry, 2015, 11: 27-45.
[15]
Hung M F, Shaw D, Chie B T. Water trading: Locational water rights, economic efficiency, and third-party effect[J]. Water, 2014, 6(6): 723-744.
[16]
孔珂, 解建仓, 岳新利, 等. 水市场的博弈分析[J]. 水利学报, 2005, 36(4): 491-495.KONG Ke, XIE Jiancang, YUE Xinli, et al. Game analysis of water resources market[J]. Journal of Hydraulic Engineering, 2005, 36(4): 491-495. (in Chinese)
[17]
王为人, 屠梅曾. 基于回流模型的水权双方叫价拍卖分析[J]. 水利学报, 2006, 37(1): 115-119.WANG Weiren, TU Meizeng. Analysis on bilateral auction price of water right based on returning flow model[J]. Journal of Hydraulic Engineering, 2006, 37(1): 115-119. (in Chinese)
[18]
Grafton R Q, Horne J. Water markets in the Murray-Darling Basin[J]. Agricultural Water Management, 2014, 145(SI): 61-71.
[19]
Wheeler S, Loch A, Zuo A, et al. Reviewing the adoption and impact of water markets in the Murray-Darling Basin, Australia[J]. Journal of Hydrology, 2014, 518(2): 28-41.
[20]
李海红, 王光谦. 水权交易机理分析[J]. 水力发电学报, 2005, 24(4): 104-109.LI Haihong, WANG Guangqian. The mechanism of the water right trade[J]. Journal of Hydroelectric Engineering, 2005, 24(4): 104-109. (in Chinese)
[21]
Turral H N, Etchells T, Malano H M M, et al. Water trading at the margin: The evolution of water markets in the Murray-Darling Basin[J]. Water Resources Research, 2005, 41: W070117.
[22]
Connell D, Grafton R Q. Water reform in the Murray- Darling Basin[J]. Water Resources Research, 2011, 47: W00G03.
[23]
Obizhaeva A A, Wang J. Optimal trading strategy and supply/demand dynamics[J]. Journal of Financial Markets, 2013, 16(1): 1-32.
[24]
Raffensperger J F, Cochrane T A. A smart market for impervious cover[J]. Water Resources Management, 2010, 24(12): 3065-3083.
[25]
Murphy J J, Dinar A, Howitt R E, et al. The design of “smart” water market institutions using laboratory experiments[J]. Environmental & Resource Economics, 2000, 17(4): 375-394.
[26]
Lumbroso D M, Twigger-Ross C, Raffensperger J, et al. Stakeholders' responses to the use of innovative water trading systems in east Anglia, England[J]. Water Resources Management, 2014, 28(9): 2677-2694.
[27]
董锋, 韩立岩. 中国股市透明度提高对市场质量影响的实证分析[J]. 经济研究, 2006, 5: 87-96.DONG Feng, HAN Liyan. Empirical study on the effects of transparency in Chinese stock market[J]. Economic Research Journal, 2006, 5: 87-96. (in Chinese)
[28]
Alfonsi A, Fruth A, Schied A. Optimal ution strategies in limit order books with general shape functions[J]. Quantitative Finance, 2010, 10(2): 143-157.
[29]
Schreinemachers P, Berger T. An agent-based simulation model of human-environment interactions in agricultural systems[J]. Environmental Modelling & Software, 2011, 26(7): 845-859.
2017, Vol. 57 
