This is actually a field within Social Psychology. In general, I am trying to avoid it these days, but the Wikipedia article on Illusory Superiority is really good. The most interesting thing I learned from the article is that people find any member of a group to be above the median of the group itself. Also: people rate themselves less better compared to specific individuals than to the abstract “average”. I think this has something to do with how we find it easier to empathize with a single individual than with a group—even a group of two. (Sorry that I don’t have a reference for this; I heard it on On The Media last week.)
Worse Than Average Effect
There is another effect—the opposite of Illusory Superiority: The Worse Than Average Effect. This is the tendency for people to under-estimate their chances of doing something that they think they have a very low chance of doing. For example, people tend to underestimate how likely they are to find a $20 bill on the ground during the next two weeks.
After writing this article (when I had read about the WTA effect, but did not write about it), I thought, “Yeah, right; that’s not going to happen to me.” It had happened: four years earlier, but I expected it to never happen again. While writing, I estimated my chances of finding a twenty in the next two weeks at about one-half of one percent. That meant that I should find a $20 bill on the ground every four years, so if my estimate was right, I was due.
It turned out that nine days later, I found a $20 bill on the ground. Freaky cool.