The externality from communal metering of residential water: The case of Tehran

Many countries use a single water meter for multiple units within a building. This creates a cost externality where the cost of water consumed is spread over all units. Using administrative data from Tehran Water and Wastewater Co. for 2013 and 2014, we find an increase in the number of units on a communal meter on average increases per unit use by 0.4%. Estimation at different levels of units reveals that almost all communal meters have higher per unit water use. The results suggest that removing this externality could save 2.7% water consumption in our sample.