WinBUGS – A Bayesian modelling framework: Concepts, structure, and extensibility
Statistics and Computing
Models of the Spiral-Down Effect in Revenue Management
Operations Research
Manufacturing & Service Operations Management
Usage Restriction and Subscription Services: Operational Benefits with Rational Users
Manufacturing & Service Operations Management
Dynamics of New Product Introduction in Closed Rental Systems
Operations Research
Testing the Validity of a Demand Model: An Operations Perspective
Manufacturing & Service Operations Management
A practical inventory control policy using operational statistics
Operations Research Letters
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This paper studies the problem of purchasing and allocating copies of movies to multiple stores of a movie rental chain. A unique characteristic of this problem is the return process of rented movies. We formulate this problem for new movies as a newsvendor-like problem with multiple rental opportunities for each copy. We provide demand and return forecasts at the store-day level based on comparable movies. We estimate the parameters of various demand and return models using an iterative maximum-likelihood estimation and Bayesian estimation via Markov chain Monte Carlo simulation. Test results on data from a large movie rental firm reveal systematic underbuying of movies purchased through revenue-sharing contracts and overbuying of movies purchased through standard (nonrevenue-sharing) ones. For the movies considered, our model estimates an increase in the average profit per title for new movies by 15.5% and 2.5% for revenue sharing and standard titles, respectively. We discuss the implications of revenue sharing on the profitability of the rental firm.