Legal Definitions - Pareto superiority

Definition: Pareto superiority is an economic concept that refers to a situation where an exchange can be made that benefits at least one person without harming anyone else. Once such an exchange is no longer possible, the situation becomes Pareto optimal.

Example: Suppose there are two people, A and B, who each have a certain amount of money. A has $100 and B has $50. A is willing to pay $75 for a rare book that B owns, and B is willing to sell it for $60. If A buys the book from B for $60, both parties benefit. A gets the book he wants and B gets $60, which is more than the book is worth to him. This is an example of Pareto superiority because the exchange benefits both parties without harming anyone else.

Another example of Pareto superiority is when a company hires a new employee who is more productive than the previous one. The new employee benefits from the job, and the company benefits from the increased productivity. No one else is harmed by this exchange.

In both examples, the exchange benefits at least one person without harming anyone else, making it an example of Pareto superiority.