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

Niklas Amberg (), Richard Friberg (), Xiang Liu () and Chad Syverson ()
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Niklas Amberg: Research Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Richard Friberg: CEPR,Norwegian School of Economics and Stockholm School of Economics
Xiang Liu: University of Minnesota, Department of Economics
Chad Syverson: University of Chicago Booth School of Business and NBER

No 466, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

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.

Keywords: Capacity utilization; demand uncertainty; newsvendor model (search for similar items in EconPapers)
JEL-codes: D22 D24 D81 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2026-05-01
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