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Multiple-criteria decision-making
Real world decision problems
multiple, diverse criteria
qualitative as well as quantitative information
AHP
Information is decomposed into a hierarchy of
alternatives and criteria
Information is then synthesized to determine
relative ranking of alternatives
Both qualitative and quantitative information
can be compared using informed judgements
to derive weights and priorities
Criteria
Style, Reliability, Fuel-economy
Cost?
Alternatives
Civic Coupe, Saturn Coupe, Ford Escort,
Mazda Miata
Hierarchical tree
Selecting
a New Car
Style
- Civic
- Saturn
- Escort
- Miata
Reliability
- Civic
- Saturn
- Escort
- Miata
Fuel Economy
- Civic
- Saturn
- Escort
- Miata
Ranking of criteria
Weights?
AHP
pair-wise relative importance
[1:Equal, 3:Moderate, 5:Strong, 7:Very strong, 9:Extreme]
Style
Reliability
Fuel Economy
Style
1/1
1/2
3/1
Reliability
2/1
1/1
4/1
Fuel Economy
1/3
1/4
1/1
Ranking of priorities
Eigenvector
[Ax = x]
Iterate
1. Take successive squared powers of matrix
2. Normalize the row sums
Until difference between successive row sums is
less than a pre-specified value
1
0.5
2
1
0.333 0.25
Row sums
12.75
22.3332
4.8333
39.9165
3
4
1.0
3.0
1.75 8.0
5.3332 3.0
14.0
1.1666 0.6667 3.0
squared
Normalized
Row sums
0.3194
0.5595
0.1211
1.0
Difference is:
0.3194
0.5595 0.1211
0.3196
0.5584
0.1220
0.3196
0.5584
0.1220
- 0.0002
= 0.0011
- 0.0009
Preference
Style
.3196
Reliability
.5584
Fuel Economy .1220
Selecting
a New Car
1.0
Style
.3196
Reliability
.5584
Fuel Economy
.1220
Ranking alternatives
Style
Civic
Civic
1/1
Saturn
Escort
4/1
1/4
1/1
1/4
4/1
1/1
1/4
1/5
.2470
Miata
6/1
4/1
5/1
1/1
.5770
Reliability Civic
Civic
1/1
Saturn
Escort
Miata
1/2
1/5
1/1
Saturn
1/4
Saturn
2/1
1/1
1/3
1/2
Escort Miata
4/1
1/6
Eigenvector
Escort Miata
5/1
1/1
3/1
1/1
4/1
2/1
1/4
1/1
.1160
.0600
.3790
.2900
.0740
.2570
Miles/gallon
Fuel Economy
(quantitative
information)
Normalized
Civic
34
.3010
Saturn
Escort
Miata
27
24
28
113
.2390
.2120
.2480
1.0
Selecting
a New Car
1.0
Style
.3196
- Civic .1160
- Saturn .2470
- Escort .0600
- Miata .5770
Reliability
.5584
- Civic
- Saturn
- Escort
- Miata
.3790
.2900
.0740
.2570
Fuel Economy
.1220
- Civic
- Saturn
- Escort
- Miata
.3010
.2390
.2120
.2480
Ranking of alternatives
Style Reliability Fuel
Economy
Civic
.1160
.3790 .3010
Saturn
.2470
.2900
Escort
Miata
.0600
.0740 .2120
.5770
.2570
.2390
.2480
.3196
*
.5584
.1220
.3060
.2720
.0940
.3280
Handling Costs
Dangers of including Cost as another criterion
political, emotional responses?
MIATA
CIVIC
SATURN
ESCORT
Cost
Normalized
Cost
Cost/Benefits
Ratio
$18K
$12K
$15K
$9K
.333
.222
.2778
.1667
.9840
1.3771
.9791
.5639
Complex decisions
Many levels of criteria and sub-criteria
Application areas
strategic planning
resource allocation
source selection, program selection
business policy
etc., etc., etc..
Group AHP