This short version of the paper offers a model and analysis of the rental process at a subscription-based business like Netflix. We analyze a priority scheduling scheme, currently in use, that gives priority to light renters over heavy renters and show that, in some situations, it may be more profitable for the firm to give priority to heavy renters which is opposite to the Netflix’s current practice. The conditions determining the optimal initial inventory are proved analytically. Extensions are briefly discussed.
Dumrongsiri, Aussadavut, "An Inventory Model with Two Classes of Customers in On-line Rental Service: Consumer Model Approach" (2008). ICEB 2008 Proceedings (Hawaii, Waikoloa, Big Island). 7.