An Option Embedded Novel Military Service System based on Cognitive Bias Theories

Abstract

We hypothesize that cognitive biases such as nostalgia, rosy retrospection, overconfidence, fading-affect bias, and prospect theory affect how to serve in the military. The behaviors of those expecting military service and those completed the service differ significantlyin evaluating the self and social value of the human capital during the military service. This difference corresponds to the predictions of the cognitive-bias literature. We test propositions in option framework. Our experimental design proposes a novel military system, a hybrid of conscription and voluntary systems. Our results are consistent with the hypothesis, option theory, and behavioral economics literature.