Working Paper
Relative Deprivation, Personal Income Satisfaction, and Average Well-Being under Different Income Distributions

This paper uses the data gained from an income categorization experiment for five shapes of income distributions to investigate background context effects, relative deprivation, range-frequency theory to explain background context effects, individual income satisfaction versus aggregate well-being, and the dual patterns of income categorization and limen setting. It is shown that background context effects exist and are reflected in relative deprivation. Not all precepts of range-frequency theory can be evidenced. Moreover, we demonstrate a welfare paradox which concerns a contradiction between individual income satisfaction and aggregate well-being. Finally, income categorization and limen setting harbor no response-mode effects, but exhibit conformity.