Public goods with costly access

We examine the optimal allocation of excludable public goods with a private access cost that some consumers may not be able to afford. The full-information benchmark is presented first. Then, individuals’ access costs and income levels are private information. When high income consumers have low access cost, asymmetric information increases the cost of subsidizing the poor for accessing the public good, and inequality increases. When the low access cost consumers have the lower income, subsidizing the poor may involve countervailing incentives, but inequality decreases. Finally, monopoly provision exacerbates underprovision of the poor, particularly of those with low access cost.