Optimism Bias (Why do we overestimate our probability of success?)
The optimism bias, a brief explanation
What is the Optimism Bias?
The optimism bias is the tendency to overestimate our probability of success in an event of situation.
Examples
Not saving money in an emergency fund because you overestimate your job security in your current workplace.
The manager in a small company not creating a risk assessment plan because they underestimate the likelihood of risks such as fire or theft.
The literature
Bracha, A. & Brown, D. J. (2012). Affective decision making: a theory of optimism bias. Games and Economic Behavior, 75(1), 67-80. Doi: 10.1016/j.geb.2011.11.004
Weinstein, N. D. (1989). Optimism biases about personal risks. Science, 246(4935), 1232-1233.
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