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Multi-Criteria Decision Making

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59 views35 pages

Multi-Criteria Decision Making

Uploaded by

Anand gowda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chameli Devi Group Of Institutions

FDP on
Multi-Criteria Decision
Making -MCDM Approach

Presented By:
Teena Trivedi
Asst. Prof.
IT Dept.
Contents
 Introduction

 Different Decision Making Approaches

 AHP-A method for MCDM

 Methodology of AHP

 Examples of AHP

 Applications of AHP
Introduction
Zeleny (1982) opens his book “Multiple Criteria Decision Making” with a
statement:

“It has become more and more difficult to see the world around us in a
unidimensional way and to use only a single criterion when judging what we see”
Introduction
 MCDM is a situation where an user want to take decision but he/she
trapped under several factors & cannot be able to find the best
alternative among the available ones.

 MCDM consists of two related paradigms:

Multiple Attribute Decision Making (MADM).


Multiple Objective Decision Making (MODM).

 MADM problems are assumed to have a predetermined, limited number


of decision alternatives.
Introduction

 In MODM unlike MADM; the decision alternatives are not given.


Instead the set of decision alternatives are explicitly defined by
constraints using multiple objective programming.

 AHP(Analytical Hierarchy Process) is a powerful technique for such


type of decision making.
Different decision making algorithm

 Multi attribute utility theory(MAUT)

 Cost-benefit analysis (CBA)

 Conjunctive and disjunctive methods

 Analytical Hierarchy Process (AHP)


MAUT
 Multi-Attribute Utility Theory (MAUT) is a structured methodology
designed to handle the tradeoffs among multiple objectives.

 One of the first applications of MAUT involved a study of alternative


locations for a new airport in Mexico City in the early 1970s.

 The end result is a rank ordered evaluation of alternatives that reflects


the decision makers' preferences. The basis of MAUT is the use of
utility functions.
Cost-benefit analysis (CBA)

 CBA is a systematic process for calculating and comparing benefits and


costs of a project, decision .

CBA has two purposes:

 To determine if it is a sound investment/decision.

 To provide a basis for comparing projects. It involves comparing the


total expected cost of each option against the total expected benefits, to
see whether the benefits outweigh the costs, and by how much.
Conjunctive and disjunctive methods

 These methods require satisfactory rather than best performance in each


criterion.

 The conjunctive method requires that an alternative must meet a


minimal performance threshold for all criteria.

 The disjunctive method requires that the alternative should exceed the
given threshold for at least one criterion.
Analytical Hierarchy Process (AHP)
 AHP is a decision making technique for solving complex decision.

 It was developed by Thomas L. Saaty in the early 1970's.

 AHP helps decision makers find one that best suits their goal and their
understanding of the problem.

 Users of the AHP first decompose their decision problem into a


hierarchy of sub-problems,.
AHP-A method for MCDM

 Each of which can be analyzed independently. The elements of the


hierarchy can relate to any aspect of the decision problem.

 Once the hierarchy is built, the decision makers systematically evaluate


its various elements by comparing them.
.
 The AHP employs an underlying scale with values from 1 to 9 to rate
the relative preferences for two items.
Verbal Judgment of Preference Numerical Rating

Extremely preferred 9

Very strongly to extremely 8

Very strongly preferred 7

Strongly to very strongly 6

Strongly preferred 5

Moderately to strongly 4

Moderately preferred 3

Equally to moderately 2
Methodology of AHP

 Identify the alternatives.

 Identify the criteria.

 Construct a pair wise comparison matrix for the criteria.

 Now, determine weights of all the criteria. For determining weights,


first normalize the pair wise matrix by dividing entries in column by the
sum of the elements in the corresponding column.
Methodology of AHP
 Then find n different comparison matrices for alternatives (on the basis of
each criterion).

 Then normalize all these n matrices and calculate the weight corresponding to
each matrix.

 Obtain the final results using these matrices and the weights. Whichever
alternative has highest score, will be the most suitable choice to the user.
Structural Diagram of AHP
Example of AHP:OS Selection
Analysis of different Operating systems using AHP:
AHP assigns 1 to all diagonal elements & aij= 1/aji.
Suppose the comparison matrix for the criteria is,

Here a21 = 2 indicates that Security is twice prior as compared to cost.


Now, as discussed earlier, normalized form of this comparison matrix will
be,
Example of AHP

 Weights w1 and w2 are also calculated here, which are calculated as


per the formula described earlier
Example of AHP
Now, let comparison matrices for three alternatives on the basis of each
criterion are,

In this matrix, OS/400 Windows has an entry 3, which indicates that


OS/400 is three times costly than Windows.
Example of AHP

In this matrix Windows OS/400 has an entry 0.5, which indicates that
Windows is half secure as compared to OS/400.
Now, after normalizing these two matrices, we will get,
Example of AHP
Example of AHP
 From these normalized matrices vectors S1 and S2 will be calculated

 Using S1, S2 and weights w1, w2, we will finally calculate final scores
for the alternatives,
A [1] = (0.211 x 0.333) + (0.25 x 0.667)
A [1] = 0.237
A [2] = (0.241 x 0.333) + (0.25 x 0.667)
A [2] = 0.247
A [3] = (0.548 x 0.333) + (0.5 x 0.667)
A [3] = 0.515
Here, OS/400 has the highest score, which indicates that OS/400 is the
most suitable Operating System for the user. Since the requirement of
the user is security, not cost, therefore Os/400 is the most suitable
Operating System for user.
Hence we can safely conclude that AHP can be used for the selection of
Operating systems.
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Example of AHP: Car Selection
Applications of AHP
AHP can be used for a wide variety of applications:

Strategic Planning

Resource Allocation

Source Selection

Business/Public Policy

Program Selection

And much more....


Thank You

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