Econometrica: Sep 1982, Volume 50, Issue 5

Information in Production

https://doi.org/0012-9682(198209)50:5<1143:IIP>2.0.CO;2-4
p. 1143-1162

Glenn M. MacDonald

The process through which individuals accumulate information on their productive traits has been analyzed extensively. The manner in which firms utilize this information has received little attention. This paper examines the latter problem in a simple optimal assignment framework. The optimal assignment is characterized, and the impact of improved information quality on the equilibrium level of output, wages, and degree of specialization is investigated.

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