Lead-time quotations in unobservable make-to-order systems with strategic customers: Risk aversion, load control and profit maximization

We develop a model for pricing, lead-time quotation and delay compensation in Markovian make-to-order production or service system with strategic customers who exhibit risk aversion. Based on concave utility function of their net benefit, make individual decisions to join the balk without observing state queue. The arriving result symmetric join/balk game. Regarding firm’s strategy, provider announces fixed entrance fee, rate part customer which exceeds quoted lead-time. analyze effect aversion policy equilibrium strategies resulting input rates, assess flexibility inducing range possible rates under various constraints pricing/compensation policy. In numerical experiments we explore behavior pricing curves that reflect provider’s choices specific rates. A key insight obtained from analysis is main benefit option allow fee remain high prefers lead this direction.