<< Click to Display Table of Contents >> Navigation: Hello, SMILE Wrapper! > Success/Forecast model |
The model encodes information pertaining to a problem faced by a venture capitalist, who considers a risky investment in a startup company. A major source of uncertainty about her investment is the success of the company. She is aware of the fact that only around 20% of all start-up companies succeed. She can reduce this uncertainty somewhat by asking expert opinion. Her expert, however, is not perfect in his forecasts. Of all start-up companies that eventually succeed, he judges about 40% to be good prospects, 40% to be moderate prospects, and 20% to be poor prospects. Of all start-up companies that eventually fail, he judges about 10% to be good prospects, 30% to be moderate prospects, and 60% to be poor prospects.