Pareto distribution:
" is a power law probability distribution found in a large number of real-world situations"

Get more definitions about Pareto distribution and other ERP related terms here. Learn everything you need about ERP software here. The Pareto distribution is a probability model for continuous variables. It looks like a ski slope. The Pareto distribution is commonly used with socio-economic and other naturally occuring quantities that are distributed in a ski slope manner with very long right tails. The long right tails describe inequality, the possibility of a few extremely large outcomes. The distribution appears to be primarily used in the business and economics fields, but also within political science. The Pareto distribution works best in situations when we want to understand the long right tails. The discrete counterpart of the Pareto distribution is Zipf’s law, which is sometimes refered to as the zeta distribution.

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Examples:
* Frequencies of words in longer texts
* The size of human settlements (few cities, many hamlets/villages)
* File size distribution of Internet traffic which uses the TCP protocol (many smaller files, few larger ones)
* Clusters of Bose-Einstein condensate near absolute zero
* The value of oil reserves in oil fields (a few large fields,many small fields)
* The length distribution in jobs assigned supercomputers (a few large ones, many small ones)
* The standardized price returns on individual stocks
* Number of species per genus (please note the subjectivity involved: The tendency to divide a genus into two or more increases with the number of pecies in it)
Terms related to Pareto distribution:
Pareto analysis
Pareto's law