http://cs-people.bu.edu/kvodski/teaching/spring10/lab7.html says:
For two points in 2-dimensional space, point ($x_i$, $y_i$) dominates ($x_j$, $y_j$) if $x_i > x_j$ and $y_i > y_j$. Given a set of points, a maxima is a point that is not dominated by any other point in the set. These points are sometimes called Pareto optimal (assuming larger values are better), and the set of maxima called the Pareto set. Given a set of $n$ 2-dimensional points, your task is to devise an $O(n \log n)$ algorithm to find the Pareto set.
Hint: draw a picture of what is going on, plot some points on paper and see which ones are Pareto optimal. Then figure out how you can find all of them efficiently. Your algorithm will need to start by sorting the points in one of the dimensions.
An $O(n^{2})$ algorithm is trivial, but an $O(n \log n)$ algorithm is more difficult to find.
I tried to approach this with performing mergesort on the $x$ points and then performing mergesort on the $y$ points and then comparing the two sets in some way. Then I get stuck.
Am I thinking about this correctly?