We present a model where information processing constraints on workers and firms lead to an endogenous matching function. We provide conditions under which the matching process has a unique equilibrium computable in closed-form. The main finding is that equilibrium matching is generally...

We develop a model of matching where participants have finite information processing capacity. The equilibrium of our model covers the middle ground between the equilibria of random matching and the directed search literatures and reproduces them as limiting cases. Our theory of targeted search...

We present a theory of targeted search, where people with a finite information processing capacity search for a match. Our theory explicitly accounts for both the quantity and the quality of matches. It delivers a unique equilibrium that resides in between the random matching and the directed...

We present a theory of discrete choice with information costs that supports deliberate stochastic choice. We use a unique experimental dataset to distinguish between errors arising from limitations on a decision maker's cognitive abilities and conscious disregard of information. Experimental...

We document new evidence on the link between business failures, markups and business cycle asymmetry in the U.S. economy. We study a model where costly information-processing constraints affect exit decisions of heterogeneous firms in the presence of an aggregate demand externality. We show that...