TESTING FOR CONSISTENT AGGREGATION

This paper designs workable empirical procedures for testing or imposing supply (demand)-price aggregators. Only single-equation methods are considered to shift the focus from any particular optimizing paradigm toward the necessities for correctly tabulating firm-level supplies (demands) and aggregate supply (demand). Both macro-and micro-level tests for consistent aggregation are developed. And constructive rules for aggregation based upon empirically observed micro behavior are provided in tabular form. Empirical tests reveal no support for the aggregate price most commonly reported by USDA. The constructive rules are then used to develop a new wheat-price index consistent with supply aggregation.