Application of a uniform price quality adjusted discount auction for assigning voluntary separation pay

Abstract

This thesis examined the feasibility of using a quality adjusted auction for retaining quality officers while assigning voluntary separation pay to Marine officers. The study used survey data to set parameters for the auction. Data used in the study was collected from a survey administered to approximately 500 officers assigned to I Marine Expeditionary Force, Naval Postgraduate School and Defense Language Institute. Furthermore, survey data was used to estimate the effects of personal, professional and economic factors on a Marine officer's decision to participate in a voluntary separation program. Results find that a quality adjusted auction for separation can provide cost savings and improve the quality of officers retained. Unlike a retention auction where higher quality officers receive higher retention bonuses, higher quality officers receive lower separation bonuses in a quality adjusted auction for separation. Probit model estimates find that expected civilian pay, personal discount rate, marital status, military occupational specialty and pay grade had a significant effect on the probability of an officer participating in a voluntary separation program. Ordinary least squares estimates find that aviation and combat service support military occupational specialties, and quality score had a significant effect on an officer's personal discount rate.