CES Seminar: Screening with rational inattention

A rationally inattentive screening agency accepts or rejects candidates, aiming to select those candidates that meet a given requirement. Candidates choose effort to increase their probability of being qualified and hence their probability of being accepted by the screener. This generic structure appears in many different contexts. We find that equilibrium behaviors are remarkably easy to characterize in terms of model primitives. There are typically two equilibria, one with high efforts on both sides and one with low efforts. Self-fulfilling prophecies and segregation may occur in equilibrium, even between ex ante identical candidate pools, and affirmative action may lead to surprising consequences.