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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
S e le c t in g
a N ew C ar
S t y le
- Civic
- Saturn
- Escort
- Miata
R e lia b ilit y
- Civic
- Saturn
- Escort
- Miata
FuelE conom y
- 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
squared
3.0
1.75 8.0
5.3332 3.0
14.0
1.1666 0.6667 3.0
Normalized
Row sums
0.3194
0.5595
0.1211
1.0
0.3196
New iteration gives normalized row sum 0.5584
0.1220
Difference is:
0.3194
0.5595 0.1211
0.3196
0.5584
0.1220
- 0.0002
= 0.0011
- 0.0009
Preference
Style
.3196
Reliability
.5584
Fuel Economy .1220
S e le c t in g
a N ew C ar
1 .0
S t y le
.3 1 9 6
R e lia b ilit y
.5 5 8 4
FuelE conom y
.1 2 2 0
Ranking alternatives
Style
Civic
Civic
1/1
Saturn
Escort
Miata
4/1
1/4
6/1
Reliability Civic
Civic
1/1
Saturn
Escort
Miata
1/2
1/5
1/1
Saturn
1/4
1/1
1/4
4/1
Saturn
2/1
1/1
1/3
1/2
Escort Miata
4/1
1/6
4/1
1/1
5/1
1/4
1/5
1/1
Escort Miata
5/1
1/1
3/1
1/1
4/1
2/1
1/4
1/1
Eigenvector
.1160
.2470
.0600
.5770
.3790
.2900
.0740
.2570
Miles/gallon
Fuel Economy
(quantitative
information)
Normalized
Civic
34
.3010
Saturn
Escort
Miata
27
24
28
.2390
.2120
.2480
113
1.0
S e le c t in g
a N ew C ar
1 .0
S t y le
.3 1 9 6
- Civic .1160
- Saturn .2470
- Escort .0600
- Miata .5770
R e lia b ilit y
.5 5 8 4
- Civic
- Saturn
- Escort
- Miata
.3790
.2900
.0740
.2570
Fuel E conom y
.1 2 2 0
- Civic
- Saturn
- Escort
- Miata
.3010
.2390
.2120
.2480
Ranking of alternatives
Style Reliability
Civic
Saturn
Escort
Miata
.1160
Fuel
Economy
.3196
.3790 .3010
.2470
.0600
.2900 .2390
.0740 .2120
.5770
.2570
.2480
.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