On the role of asymmetric information in the aggregate matching function

When agents in the labour market are fully known, labour matching process is expected to match all agents in the smaller group as the size of the labour market becomes large. Moreover, its convergence occurs fairly quickly. Its implication is that there will be no prolonged unemployment, contradicting the observation. It implies some kind of disruption of perfect information plays a critical role in job matching. The present paper shows that a matching process which arises when there is a cost to collect information about agents exhibits desirable properties that fit data: incomplete matching, emergence of involuntary unemployment, constant returns to scale of matching function, instability of Beveridge curve, and counterclockwise trajectory on the uv plane