Pareto Distribution

Posted by Beetle B. on Tue 06 June 2017

The Pareto distribution is good for approximating income distributions or population sizes.

The pdf is given by:

\begin{equation*} f(x)=\frac{k\theta^{k}}{x^{k+1}},x\ge\theta \end{equation*}

and 0 otherwise.

It is the source of the 80-20 rule. Note that for income, it doesn’t work well for low incomes (as someone’s net income can be negative).