I think a large part of this has to do with cultural attitude, and how projecting yourself as unnecessarily positive pays off in American culture. I bet most of the studies in that paper were done in the US, or at least in the West, and would have shown different results in a different culture.
In the US, saying something like "Oh yeah, I want to be pretty good at it, maybe a bit better than average." is considered a recipe for failure. Every parent seems to think that their kid is special, top of the class, Ivy League material with perfect scores everywhere.
As a result, you get a large number of peoplewho self-assess overly highly, amongst whom there are a few competent people. Also, with the tendency to not actually describe people at their appropriate level, there tends to be a sort of arms race with people evaluating themselves higher and higher. So an 'average' person becomes 'wonderful', and a 'good' person becomes 'stratospheric'.