In this paper, we provide novel evidence on firms' attention allocation in a production network. Based on internet traffic log files collected by EDGAR, we construct a firm-level panel that measures firms’ browsing intensity on other firms’ electronically filed reports. We find that: (1) firms pay more attention to other firms that are closer to themselves in terms of network distance; (2) firms pay more attention to other firms that are more volatile; (3) a firm's absolute forecast error decreases in its total browsing activities. We then build a framework where firms rationally acquire information to set prices in a production network. The model’s predictions on firms' attention allocation are consistent with the empirical patterns. In this framework, we show that the optimal monetary policy design significantly differs from that in a model where informational frictions are exogenously given.


This talk is presented by the Macroeconomics Seminar, sponsored by the Department of Economics with generous gifts given through the Michael Beauregard Fund for Macroeconomics and the Economics Strategic Fund.

This talk is presented by the International Economics Seminar, sponsored by the Department of Economics with generous gifts given through the Economics Strategic Fund.