We provide an information-based theory of matching efficiency fluctuations. Rationally inattentive firms have limited … capacity to process information and cannot perfectly identify suitable applicants. During recessions, higher losses from hiring … unsuitable workers cause firms to be more selective in hiring. When firms cannot obtain sufficient information about applicants …

systematic ways. For example, students who receive extremely positive information about their ability revise upward their … prediction for short-term grade-point average (GPA). Similarly, those who receive very negative information revise downward their … analysis: Prior beliefs about outcomes to be realized in college tend to be fairly precise, while new information influences …

Standard sticky information pricing models successfully capture the sluggish movement of aggregate prices in response … to monetary policy shocks but fail at matching the magnitude and frequency of price changes at the micro level. This … paper shows that in a setting where firms choose when to acquire costly information about different types of shocks …

be traced to the incompleteness of markets (due to private information) and the increased price volatility that results …