| name | er - Economic Research |
| description | Systematic analysis of economic viability, cost structures, and comparative advantage |
| output | {"format":"prose"} |
Economic Research
Input: $ARGUMENTS
Interpretations
Before executing, identify which interpretation matches the user's input:
Interpretation 1 — Assess economic viability of a venture: The user has a business idea, investment, or project and wants to analyze whether the economics work — costs, revenue potential, break-even, and scenarios.
Interpretation 2 — Analyze an industry or market: The user wants to understand the competitive landscape, market dynamics, and comparative advantage within a specific industry or sector.
Interpretation 3 — Evaluate an economic policy or decision: The user is assessing a policy proposal, reshoring decision, or large-scale economic choice and needs impact analysis, distributional effects, and scenario modeling.
If ambiguous, ask: "I can help with assessing venture viability, analyzing an industry or market, or evaluating an economic policy — which fits?"
If clear from context, proceed with the matching interpretation.
Overview
Systematic analysis of economic viability, cost structures, and comparative advantage
Steps
Step 1: Framework selection
Choose appropriate analytical frameworks for the question:
FOR INDUSTRY ANALYSIS:
- Porter's Five Forces: Competitive dynamics assessment
- Supplier power, buyer power, threat of entry, substitutes, rivalry
- Value chain analysis: Where value is created/captured
- Primary activities, support activities, margin analysis
- Comparative advantage: Why here vs. elsewhere
- Factor conditions, demand conditions, related industries, strategy
FOR VIABILITY ASSESSMENT:
- Cost-benefit analysis: Total costs vs. total benefits
- Break-even analysis: Volume/price needed for profitability
- Sensitivity analysis: How outcomes change with key variables
- Total cost of ownership: Full lifecycle costs
FOR POLICY ANALYSIS:
- Economic impact assessment: Jobs, GDP, tax revenue
- Multiplier effects: Direct, indirect, induced impacts
- Distributional analysis: Who benefits, who bears costs
Select 2-3 frameworks most relevant to the question.
Step 2: Data collection
Gather relevant economic data systematically:
GOVERNMENT STATISTICS:
- Bureau of Labor Statistics (BLS): Wages, employment, productivity
- Census Bureau: Industry statistics, trade data
- Bureau of Economic Analysis (BEA): GDP, input-output tables
- International: OECD, World Bank, IMF databases
INDUSTRY SOURCES:
- IBISWorld, Statista: Industry reports and market data
- Trade associations: Industry-specific statistics
- Company filings: Public company financials (10-K, earnings)
ACADEMIC/RESEARCH:
- NBER working papers: Economic research
- Federal Reserve: Regional economic data
- Think tanks: Policy research and analysis
KEY DATA TYPES TO COLLECT:
- Cost structures: Labor, materials, energy, capital, logistics
- Market data: Size, growth, segments, pricing
- Trade flows: Imports, exports, tariffs
- Productivity: Output per worker, efficiency metrics
- Comparative data: Across geographies, time periods, competitors
Document data sources, dates, and any quality concerns.
Step 3: Cost structure analysis
Break down and compare cost components:
DIRECT COSTS:
- Labor: Wages, benefits, payroll taxes
- Include productivity adjustments (output per hour)
- Materials: Raw materials, components, packaging
- Include quality differences and waste rates
- Energy: Electricity, fuel, utilities
- Include reliability and price volatility
INDIRECT COSTS:
- Capital: Equipment, facilities, depreciation
- Include financing costs and utilization rates
- Logistics: Transportation, warehousing, inventory
- Include lead times and supply chain risks
- Regulatory: Compliance, permits, environmental
- Include uncertainty and change risk
- Overhead: Management, support functions, IT
HIDDEN/OFTEN-MISSED COSTS:
- Quality costs: Defects, rework, warranty
- Coordination costs: Managing distant operations
- IP protection: Risks and mitigation costs
- Currency risk: Exchange rate exposure
- Inventory carrying: Working capital tied up
Compare across:
- Geographies (domestic vs. foreign alternatives)
- Time periods (historical trends, future projections)
- Competitors (relative cost position)
Step 4: Market dynamics analysis
Analyze supply and demand factors:
DEMAND SIDE:
- Market size: Current and projected (units, dollars)
- Growth drivers: What's driving demand up/down
- Customer segments: Who buys, different needs/willingness to pay
- Price sensitivity: Elasticity, value vs. price competition
- Demand stability: Cyclicality, seasonality, volatility
SUPPLY SIDE:
- Current capacity: Existing production capacity utilization
- Competitor landscape: Major players, market shares, strategies
- Barriers to entry: Capital, technology, regulation, relationships
- Supply chain: Key suppliers, concentration, dependencies
- Capacity trends: New entrants, expansions, exits
MARKET DYNAMICS:
- Competitive intensity: How fierce is competition
- Pricing power: Can you set prices or are you price-taker
- Technology disruption: Emerging technologies that could change market
- Regulatory changes: Policy shifts affecting market
- Substitution risk: Alternative products/solutions
Apply Porter's Five Forces if selected in Step 1.
Step 5: Comparative advantage assessment
Evaluate competitive positioning using Diamond Model:
FACTOR CONDITIONS:
- Natural resources: Raw material availability and cost
- Human resources: Skilled labor availability, education, training
- Knowledge resources: R&D capabilities, innovation infrastructure
- Capital resources: Access to financing, investment
- Infrastructure: Transportation, communications, utilities
DEMAND CONDITIONS:
- Domestic market: Size, sophistication, growth
- Customer expectations: Quality standards, innovation demands
- Early adopter presence: Lead users driving innovation
RELATED/SUPPORTING INDUSTRIES:
- Supplier ecosystem: Proximity and capability of suppliers
- Complementary industries: Supporting services and products
- Cluster effects: Agglomeration benefits
FIRM STRATEGY AND RIVALRY:
- Competitive intensity: Local competition driving improvement
- Management practices: Quality of business leadership
- Investment orientation: Long-term vs. short-term focus
GOVERNMENT AND CHANCE:
- Policy environment: Supportive vs. restrictive policies
- Trade policy: Tariffs, agreements, barriers
- Stability: Political and economic predictability
Compare positioning across alternatives.
Step 6: Scenario modeling
Model outcomes under different assumptions:
BASE CASE:
- Most likely assumptions
- Expected values for key variables
- Probability-weighted expectations
- Result: Expected outcome
OPTIMISTIC CASE:
- Favorable conditions (top 10-20% outcomes)
- What would have to go right
- Assumptions: Strong demand, lower costs, supportive policy
- Result: Upside potential
PESSIMISTIC CASE:
- Unfavorable conditions (bottom 10-20% outcomes)
- What could go wrong
- Assumptions: Weak demand, cost overruns, adverse policy
- Result: Downside risk
SENSITIVITY ANALYSIS:
- Which variables matter most?
- How much does outcome change with each?
- What are the break-even points?
- Which assumptions are most uncertain?
KEY VARIABLES TO TEST:
- Demand growth rate
- Key input costs (labor, materials, energy)
- Exchange rates (if international)
- Capacity utilization
- Pricing/margin assumptions
- Policy/regulatory changes
Build simple financial model if appropriate.
Step 7: Synthesis and recommendation
Integrate findings into actionable conclusions:
-
KEY FINDINGS SUMMARY
- What did each analysis reveal?
- What are the most important data points?
- What surprised us or challenged assumptions?
-
VIABILITY ASSESSMENT
- Viable: Positive economics under realistic assumptions
- Marginal: Viable only with specific conditions or investments
- Not viable: Negative economics unlikely to be overcome
-
CRITICAL SUCCESS FACTORS
- What must be true for success?
- What investments or changes are required?
- What external conditions are needed?
-
KEY RISKS
- Biggest threats to viability
- Probability and impact of each
- Mitigation strategies available
-
RECOMMENDATIONS
- Proceed: Move forward with identified investments/conditions
- Modify: Adjust scope, timing, or approach
- Abandon: Do not pursue, economics unfavorable
- Investigate: Need more information before deciding
-
CONFIDENCE ASSESSMENT
- How confident are we in the analysis?
- What would change the conclusion?
- What additional research would help?
Document all assumptions explicitly.
When to Use
- Evaluating manufacturing reshoring or offshoring decisions
- Analyzing industry competitiveness and market positioning
- Policy analysis for economic development initiatives
- Large-scale capital investment decisions
- Market entry feasibility assessment
- Supply chain restructuring analysis
- Comparative advantage assessment between locations
- Cost-benefit analysis for major projects
Verification
- Analysis uses credible, documented data sources
- Cost components are comprehensive (direct, indirect, hidden)
- Both demand and supply factors analyzed
- Multiple scenarios considered with sensitivity
- Key assumptions explicitly documented
- Conclusion follows logically from evidence
- Recommendation is actionable with clear conditions
