Fire Alarm Companies

Always fun to recognize how a first logical sense counterintuitive. A new look at Netflix (er. .. Qwikster of) early decision would enable the people to keep the movies as long as they wanted, found that this policy not only contributes to Netflix in a marketing perspective, but also means Netflix has that they buy fewer movies than if it had imposed limits of time and late fees. This seems intuitive-cons. After all, if people can keep the DVD forever, there is greater uncertainty, and Netflix could theoretically send a floppy disk and never see her again. So you'd think supplies would have to take these huge chunks of time that people can keep the DVD.

The problem with this thinking is that only looking at the "market" for a single DVD instead of the biggest market of all the movies from Netflix, and calls the kind of models you think. The researchers found that, noting that people keep allowing the DVD and in fact

slows the rate at which new DVD making

, which reduces the amount of DVD Netflix needs. In other words, if there is a limit of time, people come back soon to DVD, meaning that Netflix would have to send them to others more quickly. This problem is particularly notable for "hot" movies, as well as new versions:

Netflix To understand how the benefits of uncertainty, it is useful to imagine a handful of customers to Netflix idealized as Bassamboo and colleagues in their paper. The only thing that all customers have in common is that when a hot new film coming out, that everything you want. If Netflix late charges imposed on their customers, the company could be sure that every customer who wanted a new special version of his latest film, once seen, and automatically returned to the release within a narrow range of a few days .



Bassamboo and colleagues found that for a hypothetical service Netflix as late fees, the company would have to store many copies of a new version, as it has with customers. Given that all customers will probably only rent once, the company would be difficult to remain profitable and offer a subscription convincing.
other hand, when Netflix allows customers to maintain indefinitely the DVD, on the return of old records and automatically request a new version is hot stages. Some customers will come back one day save a new version comes out, while others have a couple of days or weeks for the return of his latest film and get a new one. Customers and ask when the next album, the more time Netflix can rent individual copies of their new releases. This is the reuse of records, or "multiplexing", which makes possible the model of Netflix.