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Have We Got News For You: Theory and Evidence on Firms’ Optimal Expected Capacity Utilization

Author

Listed:
  • Amberg, Niklas

    (Research Department, Central Bank of Sweden)

  • Friberg, Richard

    (CEPR,Norwegian School of Economics and Stockholm School of Economics)

  • Liu, Xiang

    (University of Minnesota, Department of Economics)

  • Syverson, Chad

    (University of Chicago Booth School of Business and NBER)

Abstract

We use quarterly micro data on capacity utilization among Swedish manufacturing firms to show that idiosyncratic factors are more important than aggregate influences in explain ing variation in capacity utilization across firms and over time. Idiosyncratic does not mean unpredictable, however. A newsvendor model of optimal capacity predicts that higher de mand uncertainty lowers expected capacity utilization, especially for high-markup firms. We find support for these predictions in data containing firm-specific, forward-looking measures of uncertainty: firms facing high uncertainty on average have seven percentage points lower capacity utilization than firms facing low uncertainty; among high-markup firms, the differ ence is nine percentage points.

Suggested Citation

  • Amberg, Niklas & Friberg, Richard & Liu, Xiang & Syverson, Chad, 2026. "Have We Got News For You: Theory and Evidence on Firms’ Optimal Expected Capacity Utilization," Working Paper Series 466, Sveriges Riksbank (Central Bank of Sweden).
    • Handle: RePEc:hhs:rbnkwp:0466
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    References listed on IDEAS

    as
    1. Chacko George & Florian Kuhn, 2019. "Business Cycle Implications of Capacity Constraints under Demand Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 94-121, April.
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    4. Gal Raz & Evan L. Porteus, 2006. "A Fractiles Perspective to the Joint Price/Quantity Newsvendor Model," Management Science, INFORMS, vol. 52(11), pages 1764-1777, November.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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