As the given definition of actor-observer bias explains, when judging ourselves we become the actor, we tend to attribute our behaviors to external factors, such as other people, our luck, the situation, etc. while others who may be judging us, the observers, attribute our behaviors to internal factors that are closely associated with the actor, such as our ability, effort, mood, or our personality (Heider). For example, as the actor, when we get a fail on a test we usually blame it on external factors, such as the teacher did not teach us well enough, while the teacher, who is the observer, will blame it on internal factors, such as our lack of ability to pass the test (Burger, Cooper, and Good).
In another example of actor-observer bias we may consider the former American president, George W. Bush as the actor, for instance. For him, his decision to invade Afghanistan and Iraq were based on the actions that Al-Qaeda and Saddam took against the United States. However, Democrats and Republicans, who are the observers, would attribute Bush’s actions to his own personal characteristics. For instance, the Democrats would blame his actions on his dogmatic and uncompromising personality, call him a bully. The Republicans would attribute his actions to his intentions and motivations to defend the United States from terrorism. Either way, Bush (the actor) would see his behavior as a result of external factors while the Democrats and Republicans (the observers) would attribute his actions to his own personality.
Under certain circumstances, actor-observer bias can also lead to conflict and misunderstanding. For example, often when we are supposed to meet someone and we do not make it on time, we may blame the traffic from preventing us from each on time, but the person we were supposed to meet may assume that we are not there because we are not interested in meeting them. Such attributions and perceptions are a part of the actor-observer bias, and lead to conflict and challenges. All these examples clearly suggesting that when acting, our bias causes us to place the blame on external factors, while when we are observing someone, we place them on internal factors associated with them.
Burger, Jerry M., Harris M. Cooper, and Thomas L. Good. "Teacher Attributions of Student Performance Effects of Outcome." Personality and Social Psychology Bulletin. 8.4 (1982): 685-690. Print.
Heider, F. The Psychology of Interpersonal Relations. Abingdon, Oxon: Psychology Press, 1982. Print.