This paper is the first to demonstrate how financial derivative approaches potentially improve a military system. We present a novel military system. It is a hybrid of conscription and voluntary military systems. Under this system, a qualified male would serve a predetermined period and then has the option of extending his military service and receiving a strike price at the end of the period. Our survey in Korea shows that the appropriate strike price is approximately $20,000 for a 10-month extension. This hybrid has the advantage of discharging unsatisfactory personnel from the military, reducing moral hazard and information asymmetry, and enhancing social welfare.
Keywords: conscription, voluntary army, option, military service, enlistment decision Correspond with Heonjae Song
학회소식
공지사항
[2015년 제 1차] A Derivative Approach to Military Service
작성자 : 관리자
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게시일 :
2015-03-04