Favourite-Longshot Bias
It’s when we over-bet on unlike winners and under-bet on favorites. This is why the odds of the favorites in the betting industry tend to be higher than their true probabilities (e.g. 2.5 to 1 return compared to 1.5 to 1 actual probability) and vice-versa for underdogs. This is a result of both overweighing probabilities (i.e. believing in more unlikely outcomes) and Diminishing Sensitivity.
Startups
Investing in startups despite the high likelihood of failure, as the probability of success has been estimated at around 10%; if a startup does succeed though, the returns will be high. In this example, the 10% probability is overweighted; the 90% failure probability is underweighted.
Choosing careers
Choosing a footballer or singer career path over a degree and a stable corporate job; while they both offer high returns when successful, one has a 0.5% to 1% chance of making it.
Also relates to: Diminishing Sensitivity · Excessive Optimism · Overconfidence · Loss Aversion · Illusion of Control