' productivities. We characterize the trade-offs between signaling by workers and costly information acquisition by firms. Information …In Spence's (1973) signaling by education model and in many of its extensions, firms can only infer workers … workers have low productivity. Our analysis applies also to other signaling problems, e.g. the financial structure of firms …

We document experimentally how biased self-assessments affect the outcome of matching markets. In the experiments, we …-effort tasks. We give participants the option to accept early offers when information about their performance has not been revealed …, or to wait for the assortative matching based on their actual relative performance. Early offers are accepted more often …