Firms delay changing prices until they have more information from other firms, causing inflation to respond slowly to changes in prices. This delay is due to the cost of changing prices and the benefit of better information going to other firms. The model shows that when information is not perfect, menu costs and the aggregate price level create rigidity in price setting, even when there is no real rigidity. This leads to inflation being slow to adjust to nominal shocks, resulting in a sluggish and hump-shaped response. The model also explains how firms reveal information to each other by changing prices, which affects price setting at the micro level and inflation at the macro level.