Water markets have been advocated to improve water resource management, especially regarding more efficient water use, and allocation with and between sectors. They are more flexible in allocating water to higher value uses in a manner acceptable to all parties, thus promoting economic growth and decreasing social tension. Anyone holding water rights may trade these freely, except, where restricted by physical constraints or water supply considerations.

A groundwater market is an arrangement in which holders of groundwater rights trade them or with outside parties. The characteristics of the market design will depend on 

• the prevailing hydrological regime
• the previous history of informal trading and/or rights
• the types and numbers of groundwater rights holders and users
• the physical arrangements for moving water between users