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Decision making
in the economic framework of utility theory
Decision problem
Single-attribute
Decision problem
Multiattribute Decision
problem
Multiattribute utility
theory
Axiom of additive
independence
Analytic Hierarchic
Processes
Ordinal Utility
consumers
had preferences
for one combination of goods
over another
Cardinal Utility
original concept of utility
moral philosopher Jeremy Bentham
formally integrated
Jevons, Menger and Walras-in the 1870s
cardinally measurable
psychological
flow of satisfactions
attached to goods and services
In AHP
order of preferences
preferences
intensity of
A hierarchy
Decision Problem
Criterion 1 (C1)
Criterion 2 (C2)
Criterion 3 (C3)
(Criterions)
Alternative 1 (A1)
(Alternatives)
Alternative 2 (A2)
decision
decision
Answer :C2
Answer :C2
Answer :C3
Decision matrix
C1
C 2 C3
C1
1/5
1/3
C2
C3
1/3
In general
Decision matrix
Reciprocity
aij=1/aji
C1
C2
C1
1
= aik
a12
C2
a21
C3
a31
a32
C3
a13
a23
1
Consistency
aij * ajk
Vector de
w1
w2
w3
Decision matrix
C1
C2
C3
C1
C 2 C3
1
1/5
1/3
5
1
3
3
1/3 1
Decision vector
w1=0.105
w 2=0.637
w3 =0.258
C1
C2
C3
Cn
w1
w2
w3
wn
A1 v11
v12 v13
v1n
w1v11+w2v12+..wnv1n
A2 v21
v22 v23
v2n
w1v21+w2v22+..wnv2n
Am vm1
vm2 vm3
vmn
w1vm1+w2vm2+..wnvmn
Conclusion ?
IF:
It would be a way to decide whether
- the Xs response- declared 3actually means 1.24
-the Ys response-declared 3actually means 3.71
so that the decision matrices corresponding to the two
respondents are more consistent than the initial ones
and this could be somehow extended to the both
hierarchies associated with the two respondents
then the arithmetic mean of the two correspondent
components in the decision vector would be a
representative approximation for the true value, thus
making the statistical representatives useless
Optics Example
DM1
C1
C2
C3
C4
C1
1
C2
5
1
C3
6
4
1
C4
7
6
4
1
DM2
C1
C2
C3
C4
C1
C2
C3
C4
3
1
4
2
1
Relative
brightness PV1
Relative
brightness PV2
0.61
0.24
0.1
0.05
0.62
0.22
0.2
0.06
Dista
nce
Normali
zed
distanc
e
Square of
normalize
d
distance
Recipr
ocal of
previo
us
column
Normali
zed
recipro
cal
Rounding
of
0.12
3
0.20
5
0.28
8
0.38
4
0.015
129
0.042
025
0.082
944
0.147
456
66.0
98
23.7
9
12.0
5
6.78
0.60
79
0.21
88
0.11
08
0.06
23
0.61
15
21
28
0.22
0.11
0.06
DMDrink Consumption
Cofe
Wine
Tea
Beer
Sodas
Milk
Water
Cofe
Wine
Tea
Beer
Sodas
Milk
9
1
9
9
9
9
9
1
1
2
Water
1
3
4
3
9
1
2
1
3
1
2
1
2
1
3
The comparison among the
priority vector (PV) corresponding
to the previous decision matrix
and the actual consumption (from
statistical sources) is shown in the
next table:
PV
Cofee
Wine
Tea
Beer
Sodas
Milk
water
0.177
0.019
0.042
0.116
0.190
0.129
0.327
Actual
consumpti
on
0.180
0.010
0.040
0.120
0.180
0.140
0.330
DMWeight
Radio
Typewriter
Large Attach Case
Projector
Small Attach Case
Radio
1
5
3
4
Typewriter
Large
Attach
Case
2
1
2
Projector
Small Attach
Case
4
8
4
PV
Radio
Typewrit
er
Large
Attach
Case
Projector
Small
Attach
Case
0.09
0.4
Actual
Relative
Weights
0.10
0.39
0.18
0.20
0.29
0.04
0.27
0.04
DMRelative Wealth
U.S.
Russia
China
France
UK
Japan
U.S.
Russia
China
France
UK
Japan
Germany
9
1
9
9
9
9
9
1
1
2
Germany
1
3
4
3
9
1
2
1
3
1
2
1
2
1
3
PV
Actual
GNP
(1972)
U.S.
Russia
China
France
UK
Japan
Germa
ny
0.427
0.23
0.021
0.052
0.052
0.123
0.094
1167
635
120
196
154
294
257
Norma
lized
GNP
Values
0.413
0.225
0.043
0.069
0.055
0.104
0.091