What is Pareto distribution?
The '''Pareto distribution''' is a [[probability distribution]] named after [[Vilfredo Pareto]]. It is [[Continuous function|continuous]] and follows a [[power law]]. It is a [[heavy tailed distribution]]. The Pareto distribution was first used to show how [[income]] is distributed among households (which is commonly called [[Income distribution]]). Pareto distributions are often used in the cases when many different small independent factors contribute to a result. Pareto wrote a book called ''Cours d'économie politique'', where he tried to show that the number of people who have an income greater than x is proportional to <math>1/x^k</math>. The parameter <math>k</math> is constant, and about 1.5. This is all that is needed to describe the Pareto distribution. [[Insurance]] companies often use Pareto distributions to model damage. {{stub}} [[Category:Probability distributions]]