Planning fallacy

The planning fallacy is a phenomenon in which predictions about how much time will be needed to complete a future task display an optimism bias and underestimate the time needed. This phenomenon sometimes occurs regardless of the individual's knowledge that past tasks of a similar nature have taken longer to complete than generally planned. The bias affects predictions only about one's own tasks. On the other hand, when outside observers predict task completion times, they tend to exhibit a pessimistic bias, overestimating the time needed. The planning fallacy involves estimates of task completion times more optimistic than those encountered in similar projects in the past. The planning fallacy was first proposed by Daniel Kahneman and Amos Tversky in 1979. In 2003, Lovallo and Kahneman proposed an expanded definition as the tendency to underestimate the time, costs, and risks of future actions and at the same time overestimate the benefits of the same actions. According to this definition, the planning fallacy results in not only time overruns, but also cost overruns and benefit shortfalls. In a 1994 study, 37 psychology students were asked to estimate how long it would take to finish their senior theses. The average estimate was 33.9 days. They also estimated how long it would take "if everything went as well as it possibly could" (averaging 27.4 days) and "if everything went as poorly as it possibly could" (averaging 48.6 days). The average actual completion time was 55.5 days, with about 30% of the students completing their thesis in the amount of time they predicted. Another study asked students to estimate when they would complete their personal academic projects. Specifically, the researchers asked for estimated times by which the students thought it was 50%, 75%, and 99% probable their personal projects would be done. 13% of subjects finished their project by the time they had assigned a 50% probability level; 19% finished by the time assigned a 75% probability level; 45% finished by the time of their 99% probability level.