Application of Bayesian Credibility Theory in Movie Rankings to Reduce Financial Risk of Production Houses

Credibility theory is a branch of actuarial science devoted to quantify how unique a particular outcome will be compared to an outcome deemed as typical.

In this paper, we will examine the application of the principles of Bayesian Credibility Theory in rating and ranking movies by a premier online movie database based on user's votes. Although the Bayesian credibility theory was developed originally as a method to calculate the risk premium by combining the individual risk experience with the class risk experience, it is generic enough to deal with a wide range of practical applications quite different from the classical application mentioned above. One such diverse application of the theory in an unlikely domain will be discussed in this paper.