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: Without heat metering, households face strong free-riding incentives. Using data from Swiss households, we find that the staggered introduction of submetering reduced heating expenses by 17%, on average. Machine learning techniques reveal highly heterogeneous effects, consistent with coordination failure in larger buildings and strategic exit of free-riders. We find that households are price elastic even when they share a common heating bill. Our results suggest that most households do not exploit the free-riding incentive, especially in smaller buildings. “Schmeduling,” inattention to the billing regime, and pro-social behavior can explain the low prevalence of free-riding. Nevertheless, submetering is welfare-improving for most buildings.

Keywords: Free-riding; submetering; individual billing; heating energy; tragedy of the commons; welfare (search for similar items in EconPapers)
JEL-codes: D61 Q41 Q52 (search for similar items in EconPapers)
Pages: 69
Date: 2025-01
New Economics Papers: this item is included in nep-big, nep-ene, nep-env and nep-eur
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