Auction mechanisms for allocating individualized non-monetary retention incentives in complex decision environments evaluation via laboratory experimentation
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Authors
Hahn, Kyle P.
Subjects
Advisors
Date of Issue
2010-03
Date
Publisher
Monterey, California. Naval Postgraduate School
Language
Abstract
Interest in non-monetary incentives (NMIs) as a retention tool in the military services is increasing
however, prior research indicates that providing the same NMIs to all retainees is an expensive and inefficient approach. This research used an experimental methodology to investigate the use of auction mechanisms that create individualized retention bonuses combining both monetary and non-monetary incentives. Specifically, the experiment examined individuals' behavior patterns in using these auction mechanisms while including NMIs with independent and combinatorial qualities (complements and substitutes). Prior research with NMIs has assumed an additive relationship
however, this is often not the case. Hypotheses suggested that experimental subjects would choose NMI combinations that maximize their personal compensation value and then appropriately adjust their bid to the optimal level. The experimental results of the study support the hypotheses. In all auction formats, individuals appropriately selected the optimal NMI combinations 70 percent of the time. Those choices that were considered complex were still chosen correctly 66 percent of the time, suggesting individuals do behave rationally when dealing with various combinations of NMIs. These results provide support for the practical use of such auction mechanisms for incorporating NMIs in the retention process.
however, prior research indicates that providing the same NMIs to all retainees is an expensive and inefficient approach. This research used an experimental methodology to investigate the use of auction mechanisms that create individualized retention bonuses combining both monetary and non-monetary incentives. Specifically, the experiment examined individuals' behavior patterns in using these auction mechanisms while including NMIs with independent and combinatorial qualities (complements and substitutes). Prior research with NMIs has assumed an additive relationship
however, this is often not the case. Hypotheses suggested that experimental subjects would choose NMI combinations that maximize their personal compensation value and then appropriately adjust their bid to the optimal level. The experimental results of the study support the hypotheses. In all auction formats, individuals appropriately selected the optimal NMI combinations 70 percent of the time. Those choices that were considered complex were still chosen correctly 66 percent of the time, suggesting individuals do behave rationally when dealing with various combinations of NMIs. These results provide support for the practical use of such auction mechanisms for incorporating NMIs in the retention process.
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Thesis
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Series/Report No
Department
Management
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Naval Postgraduate School (U.S.)
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Format
xviii, 155 p.
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Approved for public release; distribution is unlimited.
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This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.