In this paper, we develop a model of in-kind redistribution where consumers participate in either a private market or a government-designed program, but not both. We characterize when a social planner, seeking to maximize weighted total surplus, can strictly improve upon the laissez-faire outcome. We show that the optimal mechanism consists of three components: a public option, nonlinear subsidies, and laissez-faire consumption. We quantify the resulting distortions and relate them to the correlation between consumer demand and welfare weights. Our findings reveal that while private market access constrains the social planner's ability to redistribute, it also strengthens the rationale for non-market allocations.

To regulate goods that generate externalities upon consumption, textbook analyses typically---and often exclusively---focus on the Pigouvian approach. As first demonstrated by Pigou (1920), a tax on each consumer equal to the marginal external damage that he causes induces him to internalize the true social impact of his consumption and restores market efficiency. However, the Pigouvian approach assumes that the amount of externality that each consumer generates can be measured and directly taxed, which is rarely the case in reality. On one hand, empirical work has shown that the amount of externality that each consumer generates is often heterogeneous: vehicle emissions per mile traveled, for example, differ not only across different vehicle types, but also within vehicles of the same make, model, and model year. On the other hand, prohibitive technological costs preclude the accurate measurement of emissions for individual vehicles.

Online platforms increasingly act as gatekeepers that enable producers to access downstream markets, while also competing with producers in these downstream markets. A prominent example is Amazon, which sells e-commerce and distribution services to producers in an upstream market, while also selling AmazonBasics and other private-label products downstream. Should platforms be allowed to control whom they compete with in downstream markets through their upstream market interactions?

Economists routinely make functional form assumptions about consumer demand to obtain welfare estimates. How sensitive are welfare estimates to these assumptions? We answer this question by providing bounds on welfare that hold for families of demand curves commonly considered in different literatures. We show that commonly chosen functional forms, such as linear, exponential, and CES demand, are extremal in different families: they yield either the highest or lowest welfare estimate among all demand curves in those families. To illustrate our approach, we apply our results to the welfare analysis of energy subsidies, trade tariffs, pensions, and income taxation.

We consider the bilateral trade problem, in which two agents trade a single indivisible item. It is known that the only dominant-strategy truthful mechanism is the fixed-price mechanism: given commonly known distributions of the buyer's value B and the seller's value S, a price p is offered to both agents and trade occurs if S ≤ p ≤ B. The objective is to maximize either expected welfare or expected gains from trade . We improve the approximation ratios for several welfare maximization variants of this problem. When the agents' distributions are identical, we show that the optimal approximation ratio for welfare is . With just one prior sample from the common distribution, we show that a 3/4-approximation to welfare is achievable. When agents' distributions are not required to be identical, we show that a previously best-known (1–1/e)-approximation can be strictly improved, but 1–1/e is optimal if only the seller's distribution is known.

How should a policymaker allocate a good to consumers via a public option when they are also able to purchase the good from a competitive private market? I consider a designer who has preferences over the outcomes of both the public option and the private market, but can design only the public option. However, her design affects the distribution of consumers who purchase in the private market---and hence equilibrium outcomes. I find that the optimal design involves rationing the public option with a small number of tiers, where the probability of allocation is constant in each tier. I derive first-order conditions that characterize how each tier should be set in the optimal design. Finally, I show that tiered rationing remains optimal under a variety of different assumptions.