Research Details

Abstract

We analyze the problem of product allocation to customers following the introduction of a new product in a closed rental system, such as Netflix. We consider two types of customers who di?er in their rental time distributions. All customers desire the newly introduced product, and if a customers request for this product is denied, she receives a substitute product and requests for the new product upon return. We study the control problem of minimizing the mean delay encountered by customers before obtaining the new product in a large market setting. We show that asymptotically this problem is equivalent to solving a linear program that depends on the entire rental duration distribution as opposed to mean alone. The optimal policy turns out to be a mixed priority rule that prioritizes the slower customer class while maintaining a base allocation to the faster customer class to ensure quick return.

Type

Working Paper

Author(s)

Achal Bassamboo, Ramandeep S. Randhawa

Date Published

2008

Citations

Bassamboo, Achal, and Ramandeep S. Randhawa. 2008. Optimal Control in a Netflix-like Closed Rental System.