Economics Cognitive Biases Questions
The illusion of superiority, also known as the superiority bias or the above-average effect, refers to the tendency of individuals to overestimate their abilities, skills, or qualities in comparison to others. This cognitive bias can influence economic decision-making by leading individuals to make overly optimistic assessments of their own financial prospects and investment abilities. They may believe they are more likely to achieve positive outcomes or higher returns than others, which can result in excessive risk-taking or overconfidence in their economic decisions. This bias can lead to suboptimal financial choices and potentially negative economic outcomes.