Applying the combinatorial retention auction mechanism (CRAM) to a cost-benefit analysis of the post 9/11 era GI Bill transferability benefit
Lay, Richard H.
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This research determined the costs, benefits and efficiency of the Post 9/11 Era GI Bill Transferability benefit by simulating four different retention mechanisms and comparing the cost of each to provide desired retention levels among a population of sailors who valued the Transferability benefit more than or less than the Cost of the mechanisms investigated were a purely monetary auction, a Universal Incentive Package (UIP) Auction, and the Combinatorial Retention Auction Mechanism (CRAM). All three mechanisms were simulated, data were analyzed and results were compared. The CRAM clearly showed it was the most efficient method for meeting retention objectives while constraining Costs to the Navy as much as possible. Cost savings to the Navy ranged from 27% to 51% over Cash Only Selective Reenlistment Bonuses (SRB). Furthermore, this report confirms that an across-the-board benefit such as GI Bill Transferability significantly reduces the positive surplus when sailors who have a Value of Transferability less than the Cost of Transferability nonetheless exploit this benefit. Maintaining the status quo SRB policy combined with the estimated negative retention effects of the GI Bill Transferability benefit only magnifies the cost ineffectiveness of the Post 9/11 Era GI Bill.
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