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Pareto Analysis

Definition

Pareto analysis is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one.

What is a 'Pareto Analysis'

A technique used for decision making based on the Pareto Principle, known as the 80/20 rule. It is a decision-making technique that statistically separates a limited number of input factors as having the greatest impact on an outcome, either desirable or undesirable. Pareto analysis is based on the idea that 80% of a project's benefit can be achieved by doing 20% of the work or conversely 80% of problems are traced to 20% of the causes.

Explaining 'Pareto Analysis'

In its simplest terms, Pareto analysis will typically show that a disproportionate improvement can be achieved by ranking various causes of a problem and by concentrating on those solutions or items with the largest impact. The basic premise is that not all inputs have the same or even proportional impact on a given output. This type of decision-making can be used in many fields of endeavor, from government policy to individual business decisions.


Further Reading


Pareto-improving campaign finance policy
www.aeaweb.org [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Motivations and limitations in implementing Halal food certification: a Pareto analysisMotivations and limitations in implementing Halal food certification: a Pareto analysis
www.emerald.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Pareto-improving social security reform when financial markets are incomplete!?Pareto-improving social security reform when financial markets are incomplete!?
www.aeaweb.org [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

An analysis of the allocation of pertinent risks in the Zambian building sector using Pareto analysisAn analysis of the allocation of pertinent risks in the Zambian building sector using Pareto analysis
www.tandfonline.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Exponentiated Pareto distributionsExponentiated Pareto distributions
www.tandfonline.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Pareto analysis based on recordsPareto analysis based on records
www.tandfonline.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Pareto improving financial innovation in incomplete marketsPareto improving financial innovation in incomplete markets
link.springer.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

Critical factors for effective implementation of the HACCP system: a Pareto analysisCritical factors for effective implementation of the HACCP system: a Pareto analysis
www.emerald.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …

An application of Pareto analysis and cause-and-effect diagram (CED) to examine stoppage losses: a textile case from BangladeshAn application of Pareto analysis and cause-and-effect diagram (CED) to examine stoppage losses: a textile case from Bangladesh
www.tandfonline.com [PDF]
… 3 COATE: PARETO-IMPROVING CAMPAIGN FINANCE POLICY … First, there are those analyses that assume, as does this paper, that campaign advertising is … Ashworth's (2003) analysis, written indepen- dently of this paper, reaches policy conclusions more consonant with …



Q&A About Pareto Analysis


What is Pareto Analysis?

Pareto analysis is a type of statistical analysis that helps in identifying the most significant causes of problems.

Where can you use it?

You can use it in many fields including government policy and individual business decisions.

How does Pareto analysis work?

The idea behind this method is that 8 of a project's benefit can be achieved by doing 2 of the work or conversely 8 of problems are traced to 2 of the causes.

Who developed this method?

Vilfredo Federico Damaso Pareto was an Italian engineer and economist who developed this method in 1906.

What does "Pareto" mean?

The word "Pareto" means "the law of the vital few".

What are some examples where you can use this method?

You can use this method in business, economics, engineering, and other fields.