The growing interest in water market transactions among policymakers and water users has created a need for understanding market price behavior and the heterogeneous nature of water rights. This article analyzes characteristics of markets, water rights, and water transactions to identify attributes which affect market values and price dispersion within regional markets. Based on econometric analysis of market data, water commodity and transaction characteristics are shown to be significantly related to market prices. Price dispersion that is unexplained by commodity attributes is related to characteristics of the regional market, including the number and size distribution of potential traders, costs of obtaining market information, and heterogeneity of water commodities traded. ¿ American Geophysical Union 1993