A sequential equilibrium for the army's targeted selective reenlistment bonus program

Wecompute a sequential equilibrium for the U.S.Army'sTargeted Selective Reenlistment Bonus Program in whichtheArmy offers a bonus, soldiers with a low cost of serving in an undesirable location accept the bonus and are sent to an undesirable location, and soldiers with a high cost of serving in an undesirable location reenlist but decline the bonus.Wefind that this program benefits both theArmy and soldiers, increases retention, increases the number of soldierswho serve in an undesirable location, and better matches soldiers to assignments.We discuss implications of our model on human resource management practices for theArmy in its administration of the bonus program and its application to other large organizations that set wages through a rules-based mechanism. © 2007 Wiley Periodicals, Inc.