Application of a Uniform Price Quality Adjusted Discount Auction for Assigning Surface Warfare Officer Retention Bonuses

Abstract

This thesis analyzes the potential benefits of implementing a unique auction model that provides community and compensation managers with the ability to control for the quality and quantity of sailors retained. The study utilizes survey data to estimate officers preference parameters and compare the cost, quantity and quality of Surface Warfare Officers (SWO) retained by the current SWO bonus, a standard uniform-price auction, and a quality adjusted discount (QUAD) auction. The results demonstrate efficiency improvements over the current retention system. The thesis supports the findings from previous research on QUAD auctions, and confirms the hypothesis that increases in quality do not necessarily create cost increases. Findings from this thesis can be used in future retention and compensation policies to more cost effectively shape the force while maintaining or enhancing quality.