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Classroom Note

Pareto 80/20 law: derivation via random partitioning

Pages 271-277 | Received 23 Jan 2008, Published online: 19 Feb 2009
 

Abstract

The Pareto 80/20 Rule, also known as the Pareto principle or law, states that a small number of causes (20%) is responsible for a large percentage (80%) of the effect. Although widely recognized as a heuristic rule, this proportion has not been theoretically based. The article considers derivation of this 80/20 rule and some other standard quotients from the mean and its interval estimation for the total value defined by the product of two variables in the random partitioning model.

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