Play It Again, Sam? Optimal Replacement Policies for A Motion Picture Exhibitor
Every week, motion picture exhibitors must decide whether to keep or replace the movies playing in their theaters in light of the past week's sales data. This decision is complex because of the dynamic decision environment, the uncertainty of demand, the complex revenue sharing terms between the retailer and the distributor, the need to commit to new movies for several weeks and the competitive release patterns of movies. This study formulates this problem as a Markov Decision Process (MDP) model, and uses it to obtain optimal replacement policies for the exhibitor.