Back when I started writing short stories (in grade school), I felt my biggest problem was producing credible dialogue - and that problem never really ends, does it?
I am very fortunate in having been raised among the works of classical English and French writers, so I went on a hunt. How did my favorite writers manage it?
Eventually I narrowed it down between my beloved Charles Dickens, who at times produced a confusion of line after line of unattributed speech, and the inspiring William Shakespeare, who pretty much nailed everything.
How disillusioned I was upon learning that Dickens was often paid by the line! This was no literary device; alas, it was pecuniary! In reviewing his works, however, I was forced to admit the occasional need to count lines back to the start of a conversation to untangle who was saying what. Some of that certainly had to do with a relatively unsophisticated grasp of Victorian-era language. All the same, the fact remained that it was sometimes difficult to distinguish among the speakers. I felt let down, somehow.
Yet in spite of the comprehension challenges faced by a novice reader of Shakespeare, it was clear to me that Will's dialogue was indeed easier to follow. There was character in it.
"Comparing apples to oranges" springs to mind, but the question remains; how does one develop full, colorful dialogue in a short story? The short answer is to strip away the crutches, those being the detailed descriptions, the physical aspect of the characters, and leave them with minimal (or no) stage directions.
In analyzing my own writing, I found my conversations were completely lifeless. The answer that I found was to practice writing simple exchanges among my characters, with no staging and no descriptions.
Below is an exaggerated example of the type of dialogue that falls flat. Let's assume for these purposes that we are already familiar with the characters in this setting: one self-assured and impatient, the other uncertain and shy.
"Who's there?" she demanded, tossing her long blonde hair.
"Just me," answered the brunette, timidly.
"Who the hell is that?"
"Um ... it's just me, sorry."
Notice that in the first example a descriptive attribute is essential? These descriptions not only encourage weak dialogue, they bog down the narrative flow. In the second sample, we know right away who is speaking and are not distracted by unnecessary details.
Try this exercise: Take two of your characters out of one of your scenes, and place them in conversation mode only - no "said Mary" allowed. Write, rewrite, etc. You know how it works. Keep going with the rewrites until each speaker develops a character. If you have beta readers familiar with what you are working on, run the unattributed conversation past them to see if they can tell who is speaking.
Next, take those dialogue lines back to your scene and reintroduce them. Can you lose any extraneous descriptives now? How about the feel - have you hit your mood?
Finally, polish it up a little. One of the most valuable pieces of advice I've ever had came from a workshop led by Ray Strait (http://www.raymondstrait.com/), who advised us all to drop "said, was, did" - and does it work! A character can sniff, giggle, state, or offer, according to his or her nature or mood at the time. Compare this rewritten scene with another. The difference should make your heart leap, so that you might actually enjoy going forward and doing some editing.
I'm not advising strings of uncredited dialogue for your final product. But as an exercise in character and dialogue development, you might find it useful.