Overestimating vs underestimating their ability has less to do with whether their estimates are correlated and more to do with the average estimation.
If estimates of ability were a truly random sample with mean of 75th percentile ability, then the net effect will be vast overestimation. If they're a truly random sample with mean at 50th percentile, it will be equal. At 25th, underestimation.
It's like how 90% of people estimate that they're in the top 50% of drivers by ability.
If estimates of ability were a truly random sample with mean of 75th percentile ability, then the net effect will be vast overestimation. If they're a truly random sample with mean at 50th percentile, it will be equal. At 25th, underestimation.
It's like how 90% of people estimate that they're in the top 50% of drivers by ability.