Rational inattention in dynamic adverse selection

I analyze a market with asymmetric information, interdependent values, multiple trading opportunities and trade frictions. The frictions can be reduced at a cost, e.g. by increasing attention, search or computing power. Raising the difference between the values of buyers and sellers can delay trade, despite the greater gains from trade. Rejecting an initial offer is a stronger signal when the offer is more attractive, so a larger difference in values raises the signalling motive, which may overwhelm the increased incentive to accept the better offer. As a result, a subsidy on trade may have the unintended consequence of freezing the market.