THEORETICAL FOUNDATION OF THE 80 20 RULE

A rigorous analysis of the 80/20 rule is made using an index for the o bserved values of the variables. Three important findings are identifi ed. First, a sufficient condition is provided for Burrell's inverse re lationship between minimum holdings and average circulation rate. Seco nd, an indexed version of Lotka's law is used to derive a sufficient c ondition for Egghe's finding on the 80/20 rule. Third, through the com puter simulations of the Simon-Yule model of Lotka's law, we identify the entry rate of new holdings as well as the number of circulations w hen the entry rate is a decreasing function to be crucial factors for the pattern of the 80/20-type curve.