Variability of valuation of non-monetary incentives motivating and implementing the Combinatorial Retention Auction Mechanism

Abstract

This thesis explores the concept of preference variability relative to non-monetary and monetary incentives in the Combinatorial Retention Auction Mechanism (CRAM). CRAM offers a mix of monetary and non-monetary incentives to encourage retention behavior. Recent research demonstrated the utility of non-monetary incentives as part of a military retention program. While CRAM was shown to cost effectively motivate retention, variability in valuation of non-monetary incentives as part of CRAM introduces complexity in eliciting preferences to implement the model. Making certain complexity decreasing assumptions regarding the personal valuation of incentives potentially affects the model cost and retention outcomes. These assumptions could potentially increase costs and retain the "wrong" sailors. This thesis examines an operational version of the CRAM, which assumes additive personal preferences across combinations of nonmonetary incentives to decrease complexity of the model. The outcomes of this "simplified" model are compared to the "more complex" previous research findings. The simplified CRAM model continues to produce cost saving, with no significant changes to the mix of personnel retained. Overall, results of the CRAM assuming additive personal preferences across combinations of nonmonetary incentives are not significantly different than the more complex model.