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Research Details

Optimal Control in a Netflix-like Closed Rental System


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.


Working Paper


Achal Bassamboo, Ramandeep S. Randhawa

Date Published



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


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