Normally, the parameter K is known and represents the lower border of the data. The parameter λ has to be adjusted to the data to obtain a best fit.
The Pareto distribution has been described for the first time by V. Pareto, an Italian economist, who discovered that a small portion of the population owns a large portion of the gross national capital (80-20-rule: 20% of the population own 80% of the capital).
The diagram at the left shows the Pareto distribution with the parameters K=1 and λ=2, 3, 5 and 10
||A few examples of data following a Pareto distribution:
- the size of meteorites (many small, few large ones)
- the size of settlements (few mega cities, many small villages)
- the wealth of persons
- the size of sand grains
||μ = Kλ/(λ-1); λ > 1
||σ = K2λ/(λ-1)2/(λ-2); λ > 2