Health-insurance premiums account for a significant portion of the cost base of U.S. corporations. A recent study finds that health-insurance premiums increase for firms that experience positive profit shocks (Dafny 2010), suggesting that the U.S. health-insurance market is not perfectly...

We develop a model to illustrate that employee compensation and product market decisions are related. When the product market is competitive and employees have low bargaining power, the unique equilibrium in our setting is for each firm's owners to offer equity-based compensation to their...