What is Pareto efficiency ? - Definition from WhatIs.com

Definition

Pareto efficiency

Part of the Business terms glossary:

Pareto efficiency is a balance of resource distribution such that one individual’s lot cannot be improved without impairing the lot of one or more other individuals.

The concept of Pareto efficiency is based on the work of Vilfredo Pareto, an Italian economist of the late 19th and early 20th century, who is better known for the Pareto principle. The concept derives from Pareto's work on income distribution and  economic efficiency. In recent years, the principle has been applied to other areas of study including engineering, project management and the social sciences.

Within a given system, if one individual or other entity can be given a benefit without worsening the situation for any other individual or entity, doing so is known as a Pareto improvement. According to this concept, it is desirable to continue to make Pareto improvements until it is no longer possible to do so because a benefit to one individual would worsen the lot of one or more others. When no further Pareto improvements can be made, Pareto efficiency is said to have been reached. 

This was last updated in August 2013
Contributor(s): Ivy Wigmore
Posted by: Margaret Rouse

Related Terms

Definitions

  • traceability

    - Traceability, in supply chain management, is the ability to identify, track and trace elements of a product or substance as it moves along the supply chain from raw goods to finished products. The ... (SearchManufacturingERP.com)

  • mass notification system

    - A mass notification system helps organizations send one-way alerts to staff and the public during a crisis situation. Notification can be triggered by humans, as well as sensing or security devices. (SearchDisasterRecovery.com)

  • backdoor selling

    - Backdoor selling is the unscrupulous practice of seeking information beyond what is publicly available as a means of gaining a competitive advantage for a contract or sale. (WhatIs.com)

Glossaries

  • Business terms

    - Terms related to business, including definitions about project management and words and phrases about human resources, finance and vertical industries.

  • Internet applications

    - This WhatIs.com glossary contains terms related to Internet applications, including definitions about Software as a Service (SaaS) delivery models and words and phrases about web sites, e-commerce ...

Ask a Question About Pareto efficiency Powered by ITKnowledgeExchange.com

Get answers from your peers on your most technical challenges

Tech TalkComment

Share
Comments

    Results

    Contribute to the conversation

    All fields are required. Comments will appear at the bottom of the article.