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

Myron Benioudakis, Apostolos Burnetas and George Ioannou

European Journal of Operational Research, 2021, vol. 289, issue 1, 165-176

Abstract: We develop a model for pricing, lead-time quotation and delay compensation in a Markovian make-to-order production or service system with strategic customers who exhibit risk aversion. Based on a concave utility function of their net benefit, customers make individual decisions to join the system or balk without observing the state of the queue. The decisions of arriving customers result in a symmetric join/balk game. Regarding the firm’s strategy, the provider announces a fixed entrance fee, a lead-time quotation and a compensation rate for the part of a customer delay which exceeds the quoted lead-time.

Keywords: Queueing; Customer equilibrium strategies; Load control; Profit maximization; Risk aversion (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:289:y:2021:i:1:p:165-176

DOI: 10.1016/j.ejor.2020.06.047

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