Pareto efficiency, or Pareto optimality, is an important notion in
economics with broad applications in
game theory,
engineering and the
social sciences. The term is named after
Vilfredo Pareto, an Italian economist who used the concept in his studies of
economic efficiency and
income distribution.Given a set of alternative allocations of say
goods or income for a set of individuals, a movement from one allocation to another that can make at least one individual better off, without making any other individual worse off, is called a Pareto improvement. An allocation is Pareto efficient or Pareto optimal when no further Pareto improvements can be made.
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