The Tragedy of the Common Heating Bill

Harald Mayr () and Mateus Souza ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We leverage quasi‐experimental variation to study how group size influences free‐riding behavior within a high‐expense environment. When buildings lack apartment‐specific heat meters, tenants use simple heuristics to split a common bill. We estimate that the staggered rollout of a corrective technology, “submetering,” reduces heating expenses by 17%, on average. Machine learning techniques uncover substantial heterogeneity, consistent with strategic exit of free‐riders and coordination failures in large buildings. Tenants in smaller buildings show minimal response and are surprisingly price elastic. Only a minority of households exploits the free‐riding incentives. Targeted submetering policies can be much more cost‐effective than universal mandates.

Keywords: Free-riding; submetering; individual billing; heating energy; tragedy of the commons; welfare (search for similar items in EconPapers)
JEL-codes: D62 Q41 Q52 (search for similar items in EconPapers)
Pages: 69
Date: 2025-01, Revised 2025-10
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