The Military Pension, Compensation, and Retirement of U.S. Air Force Pilots

42 Pages Posted: 21 Jun 2000 Last revised: 22 Jul 2010

See all articles by John A. Ausink

John A. Ausink

Government of the United States of America - U.S. Air Force Academy

David A. Wise

National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: December 1993

Abstract

This paper uses the option value model of Stock and Wise to analyze the departure patterns of a sample of pilots in the United States Air Force. Pilot compensation and the military pension are described, as are some details of the option value model and two other models: the Annualized Cost of Leaving (ACOL) model, which is used by the Department of Defense, and a variant of a dynamic programming model proposed by Daula and Moffitt. The option value model captures departure behavior much better than the ACOL model, and substantially better than the dynamic programming model. The superiority of the option value model to the dynamic programming formulation raises the possibility that individual decision-making may not always be best modeled by a formulation that is intended to capture 'correct' economic financial calculations. This is consistent with findings by Lumsdaine, Stock and Wise for civilians in a Fortune 500 firm.

Suggested Citation

Ausink, John A. and Wise, David A., The Military Pension, Compensation, and Retirement of U.S. Air Force Pilots (December 1993). NBER Working Paper No. w4593. Available at SSRN: https://ssrn.com/abstract=226782

John A. Ausink

Government of the United States of America - U.S. Air Force Academy

DMFS 2354 Fairchild Drive, Suite 6D2A
Colorado Springs, CO 80840-6234
United States

David A. Wise (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS)

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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