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Multicriteria Decision Making

The document describes the analytical hierarchy process (AHP), a decision-making technique developed by Saaty. AHP breaks down a decision into a hierarchy with criteria and alternatives at different levels. Pairwise comparisons are used to determine the relative importance of criteria and alternatives. Judgments from the comparisons are used to calculate priority vectors to rank the alternatives. Consistency is ensured through a consistency index. The process involves developing pairwise comparison matrices, normalizing values within each matrix to generate priority vectors, then synthesizing the vectors to obtain an overall ranking of alternatives. AHP provides a systematic approach to complex multi-criteria decision making.

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43 views20 pages

Multicriteria Decision Making

The document describes the analytical hierarchy process (AHP), a decision-making technique developed by Saaty. AHP breaks down a decision into a hierarchy with criteria and alternatives at different levels. Pairwise comparisons are used to determine the relative importance of criteria and alternatives. Judgments from the comparisons are used to calculate priority vectors to rank the alternatives. Consistency is ensured through a consistency index. The process involves developing pairwise comparison matrices, normalizing values within each matrix to generate priority vectors, then synthesizing the vectors to obtain an overall ranking of alternatives. AHP provides a systematic approach to complex multi-criteria decision making.

Uploaded by

manh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Multicriteria Decision Making

Analytical Hierarchy Processes

Overview of AHP
GP answers how much?, whereas AHP
answers which one?
AHP developed by Saati
Method for ranking decision alternatives
and selecting the best one when the
decision maker has multiple objectives, or
criteria

Examples
Buying a house
Cost, proximity of schools, trees, nationhood,
public transportation

Buying a car
Price, interior comfort, mpg, appearance, etc.

Going to a college

Demonstrating AHP Technique


Identified three potential location alternatives:
A,B, and C
Identified four criteria: Market, Infrastructure,
Income level, and Transportation,
1st level: Goal (select the best location)
2nd level: How each of the 4 criteria contributes
to achieving objective
3rd level: How each of the locations contributes
to each of the 4 criteria

General Mathematical Process


Establish preferences at each of the levels
Determine our preferences for each location
for each criteria
A might have a better infrastructure over the other
two

Determine our preferences for the criteria


which one is the most important

Combine these two sets of preferences to


mathematically derive a score for each
location

Pairwise Comparisons
Preference Level

Used to score each


alternative on a
criterion
Compare two
alternatives according
to a criterion and
indicate the
preference using a
preference scale
Standard scale used
in AHP

Numerical
Value

Equally preferred

Equally to moderately
preferred

Moderately preferred

Moderately to strongly
preferred

Strongly preferred

Strongly to very strongly


preferred

Very strongly preferred

Very strongly to extremely


preferred

Extremely preferred

Pairwise Comparison
If A is compared with B
for a criterion and
preference value is 3,
then the preference value
of comparing B with A is
1/3
Pairwise comparison
ratings for the market
criterion
Any location compared to
itself, must equally
preferred

Market
location

1/3

1/5

1/2

Other Pairwise Comparison


Market

Income level

location

location

1/3

1/3

1/5

1/6

1/9

1/2

Infrastructure

Transportation

location

location

1/3

1/3

1/2

1/7

1/4

Developing Preferences within Criteria


Market

Prioritize the decision


alternatives within each
criterion
Referred to synthesization
Sum the values in each
column of the pairwise
comparison matrices
Divide each value in a column
by its corresponding column
sum to normalize preference
values

location

1/3

1/5

1/2

11/6

16/5

Market
location

6/11

3/9

5/8

2/11

1/9

1/16

3/11

5/9

5/16

Values in each column sum to


1

Average the values in each


row

Provides the most preferred


alternative (A, C, B)
Last column is called
preference vector

Market
location

Average

0.5455

0.333

0.6250

0.5012

0.1818

0.1111

0.0625

0.1185

0.2727

0.5556

0.3125

0.3803

Other Preference Vectors


Location

Market

Income Level

Infrastructure Transportation

0.5012

0.2819

0.1780

0.1561

0.1185

0.0598

0.6850

0.6196

0.3803

0.6583

0.1360

0.2243

Ranking the Criteria


infrastructure

Transportation

Accomplished the same


way we ranked the
locations within each
criterion, using pairwise
comparison

Market

1/5

Income

Income

which one is the most


important and which one is
the least important one

Criteria

Market

Determine the relative


importance or weight of
the criteria

infrastructure

1/3 1/9

Transportation

1/4 1/7 1/2

Normalizing
Average

Transportation

Infrastructure

Income

Market

Criteria

Market

0.1519

0.1375

0.2222

0.2857

0.1993

Income

0.7595

0.6878

0.6667

0.5000

0.6535

Infrastructure

0.0506

0.0764

0.0741

0.1429

0.0860

Transportation

0.0380

0.0983

0.0370

0.0714

0.0612

Income level is the highest priority criterion followed by market

Developing Overall Ranking

0.5012

0.2819

0.1780

0.1561

0.1185

0.0598

0.6850

0.6196

0.3803

0.6583

0.1360

0.2243

Overall Score A= (0.1993)(0.5012)+(0.6535)(0.2819)+


(0.1780)(0.0860)+(0.1561)(0.0612)
=0.3091
Overall Score B =0.1595
Overall Score C =0.5314

Average

Transportation

Infrastructure

Income Level

Market

Location
A

Criteria

Market

0.1993

Income

0.6535

Infrastructure

0.0860

Transportation

0.0612

Preference Vector

Summary
Develop a pairwise comparison matrix for each decision
alternative for each criterion
Synthesization
Sum values in each column
Divide each value in each column by the corresponding column
sum
Average the values in each row (provides preference vector for
decision alternatives)
Combine the preference vectors

Develop the preference vector for criteria in the same


way
Compute an overall score for each decision alternative
Rank the decision alternatives

AHP Consistency
Decision maker uses pairwise comparison to establish the
preferences using the preference scale
In case of many comparisons, the decision maker may lose
track of previous responses
Responses have to be valid and consistent from a set of
comparisons to another set
Suppose for a criterion
A is very strongly preferred to B and A is moderately preferred to
C
C is equally preferred to B
Not consistent with the previous comparisons

Consistency Index (CI) measures the degree of


inconsistency in the pairwise comparisons

CI Computation
Pairwise Comparison Matrix
infrastructure

Transportation

1/5

.1993

Income

.6535

infrastructure

1/3

1/9

Transportation

1/4

1/7

1/2

Income

Market

Criteria

Market

Consider the pairwise


comparisons for the 4 criteria
Multiply the Pairwise
Comparison Matrix by the
Preference Vector
Divide each value by the
corresponding weights from
the preference vector
If the decision maker was a
perfectly consistent decision
maker, then each of these
ratios would be exactly 4
CI=(4.1564-n)/(n-1), where n
is the number of being
compared

(1)(0.1993)+ (1/5)(0.6535)++(4)(0.0612)=0.8328
(5)(0.1993)+ (1)(0.6535)++(9)(0.0612)=2.8524
(1/3)(0.1993)+ (1/9)(0.6535)++(2)(0.0612)=0.3474
(1/4)(0.1993)+ (1/7)(0.6535)++(1)(0.0612)=0.2473
0.8328/0.1993=4.1786
2.8524/06535=4.3648
0.3474/.0760=4.0401
0.2473/0.0612=4.0422
Ave
=4.1564

Preference
Vector

.0860
.0612

Degree of Consistency

10

1.51

1.45

1.41

1.32

1.24

1.12

0.90

RI

0.58

CI=(4.1564-4)/(4-1)=0.0521
If CI=0, there would a perfectly
consistent decision maker
Determine the inconsistency
degree
Determined by comparing CI
to a Random Index (RI)
RI values depend on n
Degree of consistency =CI/RI
IF CI/RI <0.1, the degree of
consistency is acceptable
Otherwise AHP is not
meaningful
CI/RI=0.0521/0.90=0.0580<0.1

Scoring Model
Similar to AHP, but mathematically simpler
Decision criteria are weighted in terms of their
relative importance
Each decision alternative is graded in terms of
how well it satisfies the criteria using Si=gijwj,
where
Wj=a weight between 0 and 1.00 assigned to criterion j
indicating its relative importance
gij=a grade between 0 and 100 indicating how well the
decision alternative i satisfies criterion j
Si=the total score for decision alternative i

Example
Decision Alternatives
Decision Criteria

Weight

Alt.1

Alt.2

Alt.3

Alt.4

Criterion 1

0.30

40

60

90

60

Criterion 2

0.25

75

80

65

90

Criterion 3

0.25

60

90

79

85

Criterion 4

0.10

90

100

80

90

Criterion 5

0.10

80

30

50

70

Weight assigned to each criterion indicates its relative importance


Grades assigned to each alternative indicate how well it satisfies each criterion
(0.3)(40)+ (0.25)(75)++(0.10)(80)=62.75
Si=gijwj= (0.3)(60)+ (0.25)(80)++(0.10)(30)=73.50
(0.3)(90)+ (0.25)(65)++(0.10)(50)=76.00
(0.3)(60)+ (0.25)(90)++(0.10)(70)=77.75

Example

II-Gear Action

Purchasing a mountain bike


Three criteria: price, gear
action, weight/durability
Three types of bikes: A,B,C
Developed pairwise
comparison matrices I,II,III
Ranked the decision criteria
based on the pairwise
comparison
Select the best bike using
AHP

Bike

1/3

1/7

1/4

III-Weight/Durability

I-Price

Bike

1/3

1/2

Criteria

Price

Gear

Weight

Price

Bike

1/3

Gear

1/3

1/6

Weight

1/5

1/2

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