Analytic Hierarchy Process

Multiple-criteria decision-making
Real world decision problems
multiple, diverse criteria
qualitative as well as quantitative information

Comparing apples and oranges?

Spend on defence or agriculture?
Open the refrigerator - apple or orange?

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

Example: Car Selection

Objective
Selecting a car

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

New iteration gives normalized row sum

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?

Separate Benefits and Costs hierarchical trees

Costs vs. Benefits evaluation
Alternative with best benefits/costs ratio

Cost vs. Benefits

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..

AHP software (ExpertChoice)

computations
sensitivity analysis
graphs, tables

Group AHP