Different Water uses and sectors in creasingly compete for limited water supplies and the rapidly rising cost of new supplies development have caused us to become aware of the fact that water is scarce in Taiwan and must be used more efficiently. It is believed that voluntary water transfers can offer a better potential for increasing the efficiency of water use than water conservation measures and raising prices of water. The purposes of this paper are to constructs a framework to evaluate the feasibility of making the transition from water rights to water markets, and to make some recommendations for how existing water polices and laws could be modified to better define such rights in order to facilitate water transfers. Based upon a presumed model we characterized some of the major differences between queuing and market allocations water. The analytical results shown that the transition to water markets can be facilitated by low transactions costs, by the availability of effective water saving technologies, and by elastic demand for products. It should be noted taht government has a role in administering water transfers and water rights due to the return-flow aspects of the water.