To explain the sub-optimal performance of erbium-doped resonant fiber lasers and superfluorescent fiber sources observed experimentally, the effects of potential loss mechanisms are explored via computer simulations. Pump excited-state absorption (ESA) at 980 nm and 1.48 micrometers , and signal ESA are unable to explain the dependence of the observed effects on concentration. Cooperative upconversion among uniformly distributed erbium ions fails to explain the observed reduction in source slope efficiency with increasing concentration. On the other hand, rapid cross-relaxation between paired ions, which might form in high concentration fibers, can produce the observed dependences. Rate equations for paired ions are used to understand their saturation behavior and their effect on the slope and threshold of fiber sources. Methods to assess the fraction of paired ions are discussed. Measurements suggest that about 18% of the ions in an aluminum co-doped silica fiber with 5 X 1019 Er3+/cm3 are paired. The effects of paired ions on the gain of Er-doped fiber amplifiers are also briefly discussed.