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We develop a model for lead-time quotation in a Markovian make-to-orderproduction or service system with strategic customers who exhibit riskaversion. Based on a CARA utility function of their net benefit, customers makeindividual decisions to join the system or balk by observing the state of thequeue. The decisions of arriving customers result in a symmetric join/balkgame. Regarding the firm's strategy, the provider announces a lead-timequotation for each state and a respective balking threshold. There is also afixed entrance fee and compensation rate for the part of a customer' delayexceeding the quoted lead-time. Moreover, we consider the problem from thepoint of view of a social optimizer who maximizes the total net benefit of thesystem.  We analyze the provider's and social optimizer's maximization problems and weconsider two cases regarding the class of lead-time quotation policies, i.e.,dynamic and single. We identify the optimal entrance thresholds in each case.Finally, through computational experiments we quantify the effect of riskaversion on the profits and the degree of flexibility that the compensationpolicy offers. It is shown that the detrimental effects of risk aversion can beaddressed more efficiently for the provider's problem compared to the socialoptimizer's one. Furthermore, the profit loss when setting a single lead-timequote is generally small compared to the optimal dynamic quotation policy.

Single vs Dynamic Lead-Time Quotations in Make-To-Order Systems with Delay-Averse Customers