Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 466: Have We Got News For You: Theory and Evidence on Firms’ Optimal Expected Capacity Utilization

Niklas Amberg (), Richard Friberg (), Xiang Liu () and Chad Syverson ()
Additional contact information
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

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

JEL-codes: D22; D24; D81

Language: English

53 pages, May 1, 2026

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