Two essays in applied economics: pay-as-you-go auto insurance and privatized military housing

Abstract

This MBA Project applies economic principles to assess changes affecting the automobile insurance industry, Pay-as-You-Drive (PAYD) and Pay-at-the-Pump (PATP). These changes could affect DoD in the future. The Project also applies economic principles to Basic Allowance for Housing (BAH) and the Military Housing Privatization Initiative (MHPI) currently affecting DoD. Each program is explained; then selected economic principles are applied that may influence decision-making of major stakeholders. Both PAYD and PATP automobile insurance provide consumers with the option to pay an amount for insurance directly related to actual miles driven. The shift from a fixed to a variable cost for automobile insurance creates an incentive for consumers to drive less, thus saving on the total cost of automobile insurance. BAH and MHPI together represent a shift in how DoD calculates and pays for housing of military service members. Congress and DoD are challenged with rebuilding military housing after decades of neglect.