Arbeitspapier
Water conservation and the common pool problem: Can pricing address free-riding in residential hot water consumption?
Water is an increasingly scarce resource. It is often distributed such that consumers do not face any marginal cost of consumption, creating a common pool problem. For instance, tenants in multi-family buildings can often consume both hot and cold water at zero marginal cost. Using high-frequency data over many years, we analyze how the introduction of apartment-level metering and billing (IMB) affects hot water consumption. We find that introducing a marginal cost, reflecting the market price, decreases consumption drastically by 26%. Hence, price interventions can curb free-riding behavior and help the conservation of cheap but precious resources. Our results also show that heavy water users in the top consumption quartile account for 72% of the reduction. Moreover, cost-benefit calculations indicate that IMB for hot water is a cost-effective policy tool for reducing water and energy consumption.
- Language
-
Englisch
- Bibliographic citation
-
Series: IFN Working Paper ; No. 1402
- Classification
-
Wirtschaft
Consumer Economics: Empirical Analysis
Renewable Resources and Conservation: Demand and Supply; Prices
Renewable Resources and Conservation: Water
Renewable Resources and Conservation: Government Policy
- Subject
-
Residential water consumption
Water conservation
Common pool problem
Free-riding
Individual metering and billing
- Event
-
Geistige Schöpfung
- (who)
-
Elinder, Mikael
Hu, Xiao
Liang, Che-yuan
- Event
-
Veröffentlichung
- (who)
-
Research Institute of Industrial Economics (IFN)
- (where)
-
Stockholm
- (when)
-
2021
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Elinder, Mikael
- Hu, Xiao
- Liang, Che-yuan
- Research Institute of Industrial Economics (IFN)
Time of origin
- 2021
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