Lake Wobegon Effect is the overestimation of self-capabilities in comparison with others which in way leads to assume oneself better than others. 

The major factor behind the Lake Wobegon Effect is self-serving bias. But practically it is impossible to be above average for all. If almost all the participant expects themselves to be above average then it is unrealistic optimism only and nothing else.

The term Lake Wobegon Effect was coined by Garrison Keiller. Lake Wobegon is imaginary place where everything is as desired. From this analogy term was derived as Lake Wobegon Effect.

In Ãppraisal process also Lake Wobegon Effect is observed. There is column of self-assessment which employee need to fill​ at the start of appraisal evaluation. In this also employee rate themselves very high without understanding relative work that they have performed.

Areas where Lake Wobegon Effects strongly observed:

1. Students

Generally students tend to overestimate their capabilities. Most students claim that they are among top x per cent of class or their batch. Very few students estimate themselves to be below average.

2. Countries with high income disparity

People in countries with high income disparity, tend to overestimate there self-worth as against countries with lower income disparity. Among the people with low income disparity, as expectations are clear, there is no scope for Lake Wobegon Effect to occur.

With high income disparity people tend to overestimate. This is probably due to the fact that high paying jobs are very less in such economies. In order to get these job s people tend to overestimate there capabilities, this overestimation happens to show that person is more capable than others.

3. Luck, Fairness etc.

People tend to overestimate themselves in their tuck in achieving results. The underlying observation is that I cannot be so unlucky. Also in case of fairness (look wise) person assumes themselves fairer than others.