Richard Friberg

We use quarterly micro data on capacity utilization among Swedish manufacturing firms to show that idiosyncratic factors are more important than aggregate influences in explaining variation in capacity utilization across firms and over time. Idiosyncratic does not mean unpredictable, however. A newsvendor model of optimal capacity predicts that higher demand 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 difference is nine percentage points.

We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to generate observed frequencies of price changes, the model can account for several aggregate regularities. In particular, price reductions are larger but less frequent than price increases, and prices respond considerably faster to cost increases than to cost decreases. The latter asymmetry is more pronounced when input prices are less volatile, as documented by Pelzman (2000).

Based on the author’s extensive experience of teaching microeconomics, this concise textbook is written specifically for introductory to intermediate courses in microeconomics. Instead of presenting a very large number of different cases and applications that can be overwhelming, the book focuses in on the key concepts in each topic, equipping readers with a solid understanding of these concepts so they are well set up to apply them to a wide range of other issues.

It covers all standard topics but is especially focused on central ideas with respect to market power, externalities and asymmetric information, linking them to practice and empirical evidence. It also includes subjects that are partly novel for microeconomics textbooks: competitive selection when firms have different marginal costs, platform markets and auctions. Throughout, the book relies on calculus, encouraging the reader to solve problems like a professional economist, utilising the same set of tools over and over again to highlight the portability of the economic way of thinking.

Supported by a wide-ranging selection of exercises with solutions, empirical examples, a mathematical appendix, links to step-by-step videos and PowerPoint slides, Microeconomics is suitable for studying microeconomics and microeconomic issues at the introductory to intermediate level.

The Open Access version of this book, available at www.taylorfrancis.com, has been made available under a Creative Commons [Attribution (CC-BY)] 4.0 International license.

We use COVID-19 border closings and comprehensive store-level data on Norwegian alcohol sales to quantify the effectcross-border shopping of alcohol on sales volume and commodity tax revenue. Effects are large, for instance, we estimate thatcommodity tax revenue for wine is about 20% lower because of cross-border shopping. Using product level data we establish thateffects come from across all products rather than just a few, but effects are especially marked for bag-in-box wines. Neither avail-ability of the exact same product in Sweden nor idiosyncratic product-level price difference with respect to Sweden has any markedeffect on the impact of cross-border shopping on sales.

Using customer-level data from 2017 for two mobile app word games in France and the US, this study explores the adaptability of customer lifetime value (CLV) models, widely used for e-commerce data, to the mobile app domain. We evaluate the Pareto/NBD model and its four extensions, focusing on dropout process simplification, transaction regularity, dropout-transaction rate correlation, and the inclusion of predictive covariates like gameplay and video views. Although the Pareto/NBD model has strong predictive performance, an extension accounting for dropout-transaction rate correlation excels in out-of-sample performance. By comparing with the e-commerce-based CDNOW dataset, we highlight significant disparities in the relative performance of different models, emphasizing the distinctive nature of mobile app data. We find also slight variations in estimated parameters across different markets, platforms, and games.

Consumer journalism guides purchasing decisions when consumers lack complete information about attributes such as price, quality, and location. We focus on consumer journalism in the grocery market, where it is too time consuming for consumers to check all prices in different stores. This makes it attractive for media to attract readers by publishing grocery price comparisons. Norway’s largest newspaper has published grocery price comparisons over more than 20 years. However, the comparisons appear only sporadically (a few times each year) and include a relatively small number of items. Despite this, our empirical analysis of the Norwegian grocery market reveals that these price comparisons have a significant impact on market performance. They intensify competition, leading to price reductions when market players anticipate upcoming comparisons. Conversely, after a comparison is published, prices increase. Remarkably, sporadic consumer journalism, offering snapshots of prices for a few products, thus has a significant impact on grocery chains’ competitive pricing behavior. Chains heavily utilize a win in a price comparison in their own advertising, further reinforcing the competitive impact of consumer journalism.

This paper examines Amar Bhidé's modernization of Knightian uncertainty as presented in Uncertainty and Enterprise. While Frank Knight's seminal 1921 distinction between risk and uncertainty remains influential, Bhidé argues that uncertainty, as commonly conceived, has become a conceptual dead end. Instead, he proposes an updated framework where uncertainty is understood as doubt arising from missing information about known unknowns. This modernization aims to make uncertainty a more operationally useful concept, particularly in the context of entrepreneurship and firm decision-making. This paper reflects on the applicability of Bhid & eacute;'s ideas beyond entrepreneurship, discussing their relevance to risk management, economic decision-making, and firm strategy. While Bhid & eacute; downplays the significance of Knight's risk-uncertainty dichotomy, this paper argues that the distinction remains analytically valuable, especially in fields such as finance and corporate strategy, where statistical tools play a role in managing risk. Additionally, the discussion revisits the concept of "unknown unknowns" and considers its practical implications for decision-making under extreme uncertainty. Drawing on examples from financial markets, corporate reporting, and mountaineering, the paper highlights how firms and individuals navigate risk and uncertainty in diverse settings. Ultimately, the analysis supports Bhid & eacute;'s call for a broader, more empirically grounded approach to uncertainty.

This paper examines how consumer price knowledge affects shopping behavior and the prices consumers pay in grocery markets. We combine survey-based price recall data from over 2000 Norwegian households — yielding over 70000 price recalls across two grocery chains and 24 products—with 18 months of of linked individual-level transaction histories. Better-informed consumers—those who recall prices more accurately—pay lower prices by timing purchases to coincide with sales. A 10 percentage point increase in price knowledge (approximately the interquartile range) is associated with a 13 percentage point reduction in prices paid. Our results provide direct support for the central mechanism in Varian’s (1980) model of sales: that informed consumers pay lower prices by exploiting temporary discounts. We also find that consumers who are more active in seeking information about prices have higher price knowledge. Taken together, and with the caveat that we are only considering consumer responses here, our results suggest that policies or tools that help consumers learn about prices may be effective in enhancing competition. Our findings also speak to a marketing literature that seeks to measure and explain consumer price knowledge. By linking survey data to actual shopping behavior, we contribute to this literature by demonstrating that shopping behavior and attitudes are stronger predictors of price knowledge than demographic characteristics.

Using quarterly micro data on capacity utilization among Swedish manufacturing firms, we show that idiosyncratic factors are much more important than aggregate influences in explaining variation in capacity utilization across firms and over time. Idiosyncratic does not mean unpredictable, however. A simple newsvendor model of optimally set capacity predicts that higher demand uncertainty lowers capacity utilization, especially for high-markup firms. We test these predictions using data that contain firm-specific, forward-looking measures of uncertainty. Firms in the top of the uncertainty distribution on average have seven percentage points lower capacity utilization than firms in the bottom. The fall in capacity utilization is more than double for firms in the top rather than bottom tercile of the markup distribution.