Sterling Enterprises is developing a model to predict which of their competitors will go bankrupt in the next two years.

However, the model predicts a higher rate of bankruptcy than expected, even though historically only $2\%$ of firms go

bankrupt annually. What is the primary error Sterling Enterprises might be making by over$-$relying on recent data and

ignoring historical bankruptcy rates?

Base rate fallacy

Overfitting the model

Classification bias

Time series error