Over-placement is peoples’ tendency to think we rank higher than others on certain dimensions, particularly in competitive contexts. This can lead people to be too interested in coppering with others in negotiations, markets and court. “Better than average” effect illustrates this in practice. For example: 93% of American drivers report themselves to be better than the median American drivers.
We select career paths, job assignments and hobbies based on our belief in our “unique” talents. Human beings get involved in situations and compete where they think they are distinctively good. However, there is a problem with this. We neglect the reference group and fail to appreciate that we will be among a select group of others, who are just like use.
Evaluating themselves to others in absolute sense, relative to population at large rather than computing themselves to the specific group which they belong to, people fail to understand reference group. We exaggerate our own abilities and limitations, failing to consider the fact that others face similar opportunities and challenges.
Over-placement results in inflated expectations that we will be victorious in e.g. lawsuits and court battles. As a result, we fight too hard and hold out too long, paying lawyers too much to fight for us.
Mistakes of over-placement leads entrepreneurs to throw away their life savings into ventures that fail. When they realise they are no better than other entrants, individuals end up broke.
On the other hand, sometimes people tend to believe they are worse than others on various dimensions. Often this is present when individuals face difficult tasks. We tend to believe to perform worse than others on hard tasks and better than others on easy tasks. This results in missed opportunities because some, being afraid to be worse than others, have no courage to trying. Additionally, human beings believe they are more likely than others to experience common events but less likely than others to experience rare events.
Bazerman, M.H. and Moore, D.A., 1994. Judgment in managerial decision making (p. 226). New York: Wiley.