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.

We introduce two linear pricing mechanisms for quasilinear economies in which market-clearing prices may not exist. Electricity markets, fisheries markets, and many others include producers with start-up costs, ramping costs, or other fixed costs that fail the convexity assumptions traditionally used to prove that clearing prices exist.