Eliciting discount rates in military personnel
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Authors
Washington, Clarence D., Jr.
Subjects
military retirement
military retirement reform
individual discount rates
personal discount rates
intertemporal choice
hyperbolic discounting
multiple price list
convex time budget
military retirement reform
individual discount rates
personal discount rates
intertemporal choice
hyperbolic discounting
multiple price list
convex time budget
Advisors
Myung, Noah
Gates, William
Date of Issue
2012-12
Date
Dec-12
Publisher
Monterey, California: Naval Postgraduate School
Language
Abstract
Several studies have been conducted to address growing concern over the cost of the current military retirement system. Recently, the Center for Naval Analysis (CNA) conducted a comprehensive study of Alternative Navy Retirement Systems. The CNA study modeled the value of the current military retirement system and alternative retirement systems to service members utilizing a net present value (NPV) measurement. The proposed alternatives attempt to offer cost savings to the Department of the Navy (DoN) while maintaining an equivalent NPV to the service member in order to mitigate retention and force structure risk associated with a change in retirement systems. A significant factor in calculating NPV is the discount rate that service members apply towards various types of compensation. Current models have utilized static discount rates which do not account for the observed changes in discount rates individuals apply towards items based on when they expect to receive those items and other biasing factors. This thesis develops a method to measure military service members discounting behaviors across different spans of time. This thesis evaluates the impact that time inconsistent discount rates might have on the NPV of retirement alternatives calculated in the draft CNA report on Navy retirement reform.
Type
Thesis
Description
Series/Report No
Department
Graduate School of Business and Public Policy (GSBPP)
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Distribution Statement
Approved for public release; distribution is unlimited.
Rights
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.