> There is one complexity that you left out, which is that they are unknowingly spending more money on heat because of the "freeloader" that they share a wall w

> There is one complexity that you left out, which is that they are unknowingly spending more money on heat because of the "freeloader" that they share a wall with. They would spend more if they were heating an outside wall with an average temperature below 19 degrees. The unheated apartment acts as additional insulation. An optimal arrangement would be for the hottest apartments to be in the core of the building with cooler apartments radiating out to the edges. But it makes sense in that scenario to price heat into a shared cost that everyone bears equally. No one would be happy with temperatures below their comfort threshold, and at the equilibrium heat flow that satisfies everyone it's worth just about the same marginal cost of keeping the temperature that way; one might offer slightly lower heating prices on the outlying apartments so that residents who had a very low comfort slope vs. temperature could pay slightly less for heat and be slightly cold, making an apartment free for a resident with a steeper comfort slope at a more affordable price.