The Actor-Observer Effect is a psychological phenomenon where individuals attribute their own actions to external factors while attributing others' actions to their internal characteristics. For example, if someone fails a test, they might blame the difficulty of the exam, but if a classmate fails, they may think the classmate is not smart or didn't study enough. This bias helps people maintain a positive self-image. This effect highlights the differences in perspective between the actor (the person performing the action) and the observer (the person watching the action). It can influence social interactions and perceptions, leading to misunderstandings and misjudgments in relationships and group dynamics.