Abstract
With reduced supply due to climate change and increased stress due to growing popula- tions, improved management of Colorado River resources becomes ever more important. Increased water trading is one management tool to increase flexibility, enhance economic well-being, and incentivize water-use efficiency. However, markets of Colorado River water remain thin. Beginning with background and history on interstate and intrastate water trading of Colorado River water, this paper reviews the Colorado River water trading lit- erature. The paper summarizes the literature on the gains from optimal reallocation and water trading, and pays particular attention to third-party impacts, issues of equity, and barriers to trade. Identification of the barriers and negative externalities associated with water trading is important in this context because water trading remains an important management tool for Colorado River users facing increased water scarcity in the future.