Multiattribute Utility

Theory
concepts
application
examples

Objectives
ECONOMIC POLICY

maximize production
equalize distribution

GOVERNMENT POLICY

reconcile many interest groups

BUSINESS

reconcile short run/long run tradeoffs

utlize long range planning (maintenance, labor)

BUSINESS OBJECTIVES
PROFIT
short run cash flow, after tax profit, long run

RISK
diversify, hedge

MARKET DEVELOPMENT
new products, wider market, quality

CAPITAL REPLENISHMENT
LABOR RELATIONS

Multiobjective Problems

Energy Policy health, environment, self-determination

Administration budgeting, setting objectives
Government services, location, tax rates
Water Resources Management
NASA project selection
MIS system selection
POM vendor selection

Finnish Energy Policy

Finland running out of energy in early 1980s
alternatives: large nuclear
large coal
conservation & small plants
1984 2 companies applied for a nuclear plant
hot issue
Hamalainen built AHP DSS for interested users

Hierarchy
F in n is h E n e r g y H ie r a r c h y
e n e r g y p o lic y
n a tio n a l e c o n o m y
cheap
s o u rc e s

fo r e ig n
tra d e

h e a lt h s a fe ty & e n v ir o n m e n t
c a p ita l
re s o u rc e s

n a t io n a l
re s o u rc e s

p o llu tio n
r e d u c t io n

a c c id e n t
a v o id a n c e

p o litic a l
in d e p e n d e n c e

c e n tr a liz a tio n

alternatives of nuclear, coal, & conservation below each lower element

Used by members of Parliament

after Chernobyl, dropped nuclear

c o o p e r a tio n

Selection Techniques
many techniques exist to support
selection decisions
multi-attribute utility theory (MAUT)
simple multi-attribute rating technique (SMART)
analytic hierarchy process (AHP)
French methods (outranking)
Russian methods (ordinal)

MAUT concepts
rigorously measure value vj
identify what is important (hierarchy)
identify RELATIVE importance (weights wk)
identify how well each alternative does on each
criterion (score sjk)
can be linear

vj = wk sjk

or nonlinear

vj = {(1+Kkjsjk) - 1}/K

MAUT concepts
basis: there is a single dimensional value
measure
it is cardinal, can be used for ranking

analysts job - find that function

(measure accurately)
scores
weights

caveats
people buy insurance (expected payoff < cost)
because they avoid risk
people gamble (expected payoff << cost)
because they are entertained
utility theory NORMATIVE (how we SHOULD act)
utility not necessarily additive
[value of 8 eggs not always = 4x(value of 2 eggs)]
money CAN serve as utility measure

conclusions
MAUT considered the scientific approach
focuses:
measure as accurately as possible
identify utility function as accurately as
possible
be as objective as possible

SMART
MAUT is a little abstract
difficult to accurately develop tradeoffs

SMART based on the same theory

simpler implementation
linear form
direct entry of relative scores & weights

SMART technique
1. identify person whose utilities are to be maximized
2. identify the issue or issues
3. identify the alternatives to be evaluated
4. identify the relevant dimensions of value for evaluating
alternatives (attribute scales)
5. rank the dimensions in order of importance
6. rate dimensions in importance, preserving ratios
7. sum the importance weights, & divide by total(wi)
8. measure how well each alternative does on each dimension(sij)
9. U = wi sij

points
in Step 4, limit criteria
there are only so many things a human can keep
track of at one time
8 plenty
if weight extremely low, drop

methodology
Step 4: Jobs: Big 5 firm, dot.com, local bank
Step 5: rank order criteria

Experience (no value to cutting edge);

Pay ($25k to $50k);
Location (unattractive to great);
Workload (40 hours/week to 80 hours/week)
Travel (very heavy to a little travel)

Step 6: rate dimensions

least important = 10: travel = 10
workload = 15
location = 20 pay = 30
experience = 45

methodology
Step 7: Develop weights
Divide by total
check: 100 for best
average
Experience
45/120 = 0.375 100/260 = 0.385
0.38
Pay
30/120 = 0.250 70/260 = 0.269
0.26
Location
20/120 = 0.167 40/260 = 0.154
0.16
Workload
15/120 = 0.125 30/260 = 0.115
0.12
Travel
10/120 = 0.083 20/260 = 0.077
0.08

methodology
purpose of swing weighting
Consider difference in scales
The input is admittedly an approximation
Giving values based on a different perspective
additional check
should yield greater accuracy

scores
Step 8: score each alternative on each criterion
need as objective a scale as you can get
doesnt have to be linear
0 worst
ideal 1.0
Experience none (0) focused (0.3) general (0.9) cutting edge (1.0)
Pay
$25k (0) $30k (0.5) $35k (0.7) $40k (0.8) $50k (1.0)
Location bad (0)
Dallas (0.7) Austin (0.9) Bryan (1.0)
Workload 80 hr (0) 70 hr (0.2)
50 hr (0.8)
40 hr (1.0)
Travel
excessive (0) lots (0.3) none (0.4)
a little (1.0)

Scores
Big 5

Dot.com

Local bank

Experience General 0.9 CutEdge1.0 Focused 0.3

Pay

$40k

0.8 $35k

0.7 $30k

0.5

Location

Dallas 0.7 Austin 0.9 Bryan 1.0

Workload

70 hr

0.2 50 hr

0.8 $40k

1.0

Travel

Lots

0.3 10%

1.0 None

0.4

calculation of value
Step 9:
U = wi sij
EXP
PAY
weights
0.38
scores: TOTALS
Big 5 0.9
0.8
Dot.com
1.0
Local bank
0.3

LOC WOR TRA

0.26 0.16 0.12 0.08
0.7
0.7
0.5

0.2
0.3
0.9 0.8
0.1 0.1

recommends the Dot.com

0.710
1.0
0.826
0.4
0.304

SMART
provides a very workable means to implement the
principles of MAUT
in fact, it can be MORE accurate than MAUT
(more realistic scores, tradeoffs)
identify criteria
develop scores over criteria
identify alternatives available, measure scores
simple calculation

selecting nuclear depository

Keeney, An analysis of the portfolio of sites to characterize for selecting a nuclear
repository, Risk Analysis 7:2 [1987]

DOE - dump nuclear waste - selected Hanford, WA

NAS criticized selection method - said use MAUT
IDENTIFY OBJECTIVE HIERARCHY
objectives attributes
measures
DETERMINE RELATIVE IMPORTANCE
lottery tradeoffs
RANK by value = weights x scores

DOE objectives
at depository
in transit

worker health effects

worker fatalities

public health effects

public fatalities

worker health effects

worker fatalities

public health effects

public fatalities

environmental aesthetic degradation

biological

degradation of archaeological, historical & cultural properties

socioeconomic
cost
repository costs

waste transportation costs

Nuclear Depository
MAUT separated facts from values
explicit professional judgments identified
14 criteria
each alternatives value on each criterion measured with
metric making sense relative to the decision (radiation expected deaths rather than rads)

interviewed policy makers for tradeoffs

Nuclear Depository
Keeney comments:
the four policy makers tended to
share values
public utility probably should be
linear

ended up digging at Yucca Mountain, Carlsbad

catch - cant use either

Hens Pastijn & Struys, Multicriteria Analysis of the Burden Sharing

in the European Community, EJOR 59 1992 248-261

European Community
1958 to 1974 financed by direct contributions
by member states
Treaty of Rome fixed proportional
contributions reflecting ability, advantage
disputes about distribution of funds since early
1970s

Study of equity of present system

European Community
revenues

External tariff - 20.1% in 1989

agricultural import levies - 2.9%
sugar storage levies - 2.9%
VAT contributions - 56.8%
on goods and services
1988 added element based on GNP

GDP-based contributions - 17.2%

European Community
Financing - 1989
Percent of EC Funding Contributed
Germany
France
Italy
Great Britain
Spain
Netherlands

26.4%
20.5%
15.4%
14.8%
7.4%
6.0%

Belgium
Denmark
Greece
Portugal
Ireland
Luxemburg

4.1%
2.2%
1.2%
1.1%
0.8%
0.2%

European Community
Financing
Problems:
country of port of entry may not be
destination (Rotterdam effect) but customs
collected in the Netherlands
Belgium, Denmark, Germany, Ireland,
Luxembourg & the Netherlands paid more
than their relative share of GDP
BENEFIT PRINCIPLE - those who benefit
should pay the tax

Reform Proposals
1976 Financial Mechanism: refund
payable if contribution significantly
higher than proportionate share of GNP
didnt work as planned

1984 corrective mechanism: rebate of

66% of difference between VAT
payment & budget expenditure share

criteria

GDP/population
POL - political willingness to cooperate
EX/GDP - exports per GDP
BEN/POP - EC payments/population
USED AHP TO GET WEIGHTS!

Weight Sets
Scen 1 Scen 2 Scen 3 Scen 4 Scen 5
GDP/POP
POL
EX/GDP
BEN/POP

.25
.25
.25
.25

.4
.4
.05
.15

.53
.27
.07
.13

.53
.13
.07
.27

1.0
-

Proportional Contributions
Germany
France
Italy
Great Britain
Spain
Netherlands
Belgium
Denmark
Greece

1989
26.36
20.49
15.43
14.77
7.36
5.97
4.12
2.19
1.23

Scen 1
26.11
21.59
17.23
14.51
6.25
5.60
3.48
2.48
1.09

Scen 2
26.10
21.79
17.50
14.51
6.37
5.37
3.31
2.40
1.06

Scen 3
26.39
21.60
17.22
14.87
6.28
5.29
3.25
2.45
1.06

Scen 4
26.33
21.45
17.07
15.16
6.27
5.26
3.24
2.51
1.09

Scen 5
26.22
21.09
17.30
15.74
6.27
5.09
3.23
2.43
1.06

conclusions
Great Britain should pay more if weight
higher for progressivity
Italy should pay less than GDP, but more
than they currently do
France & Denmark should pay more
smaller countries should pay less

Disposition of Weapons
Grade Plutonium
end of cold war
desire for disarmament
want to get rid of plutonium

Clinton Directive
September 1993

Where possible, eliminate stockpiles of HEU & Pu,

ensure they are subject to highest standards of safety,
security, international accountability
Try to purchase HEU from former USSR & other
countries and convert to reactor fuel
Start comprehensive review of long-term options for Pu
disposition, considering technical, nonproliferation,
environmental, budgetary, & economic factors; invite
international participation

Problem Scope
about 50,000 tons of Pu is surplus in
US
about twice that amount surplus in
former USSR
form is pits (warheads)
at plants ready to make warheads
at breeder reactors (Pu production facilities)
contaminated waste (gloves, etc.)

Plutonium Characteristics

artificial
EXTREMELY toxic
very long half-life (centuries)
NOT a particularly efficient reactor fuel,
but can be used
if used in reactors, there still would be about 92% of Pu
left over (but it would not be suitable for weapons)
lots of other spent fuel Pu, but has natural barrier
(you die if you pick it up)

Disposition Process
transport warhead Pu to oxidation site
oxidize Pu to PuOx
Process
vitrify: apply radionuclide, encase in matrix
borehole: vitrify (or none)
reactor: burn

permanent storage

Decision Process
Notice of Intent for Programmatic

Environmental Impact Statement

Department of Energy

21 Jun 1994

Office of Fissile Materials Disposition

want Documented Record of Decision

phase 1: SCREENING 17 Mar 95 41 options down to 11
phase 2: multiattribute analysis
down to 1 - 3
phase 3: final decision

Screening Criteria
disposition

long term storage

resistance to theft & diversion by unauthorized parties

resistance to retrieval, extraction, & reuse by host nation
technical viability
environmental, safety, & health
cost effectiveness
timeliness
foster progress & cooperation with Russia and others
public & institutional acceptance
additional benefits

*
*
*
*
*
*
*

Disposition Options
storage options
no disposal action
baseline
radiation barrier alloy
X:open-ended, ES&H
immobilization with radionuclides

underground nuclear detonation

X: ES&H, licensing/regulatory
borosilicate glass immobilization (DWPF) X: ES&H, cost
borosilicate glass immobilization (new)
reasonable
ceramic immobilization
reasonable
electrometallurgical treatment
reasonable
borosilicate glass oxidation/dissolution
reasonable

Disposition Options
direct disposal options

direct emplacement in HLW repository

deep borehole (immobilized)
deep borehole (direct emplacement)
discard to WIPP
hydraulic fracturing
deep well injection
injection into continental magma
melting in crystalline rock
disposal under ice caps
seabed (placement on ocean floor)
ocean dilution
deep space launch

X: retrievable, time
reasonable
reasonable
X: capacity
X: technical viability
X: ES&H
X: technical viability, ES&H
X: technical viability, ES&H
X: technical viability, ES&H
X: technical viability
X: ES&H, treaty
X: retrievability, ES&H

Disposition Options
Reactor & Accelerator Options

Euratom MOX fabrication/reactor burning

existing light water reactors (LWRs)
partially completed LWRS
evolutionary or advanced LWRS
naval propulsion reactors
modular helium reactors (MHRS)
CANDU heavy water reactors
ALMRS with pyroprocessing
accelerator conversion
LWRS with reprocessing
ALMRS with recycle
particle bed, molten salt reactors

reasonable
reasonable
reasonable
reasonable
X: transparency
X: technical maturity
reasonable
X: technical maturity, ES&H
X: technical maturity
X:theft diversion, policy
X: technical maturity, policy
X: technical maturity

Phase 2: MAUT Analysis

Decision maker - Secretary of Energy
Project manager - Office of Fissile
Materials Disposition
Technical Analysis - National
Laboratories
Livermore, Oak Ridge, Sandia

MAUT Framework - Pantex

UT, Texas A&M

Phase 2 Purpose
to generate a multiattribute utility model
option score=sum(weights*obj scores)

National Laboratories - give accurate

estimates of each options score on
each objective
OFMD - source of relative weights

Phase 2 Objectives
evolutionary - this was the initial set
non-proliferation
max resistance to theft from unauthorized parties
max resistance to diversion by host nation
max international cooperation & compliance
operational effective max technical viability
max cost effectiveness
max timeliness
max additional benefits
env, saf, & health
protect human health & safety
protect the natural environment
protect the human environment
public & institutional acceptance

Phase 2 Objectives
NonProliferation Theft material characteristics
environment
safeguards & security
Diversion
material characteristics
environment
safeguards & security
Irreversibility form
location
International Cooperation
Russian
civil use of plutonium
Timeliness start year
time to complete

Phase 2 Objectives
Operational Effectiveness Technical Maturity
Cost
Investment Cost
Life Cycle Cost
Environment, Safety, & Health
Human Health & Safety
Natural Environment
Socio-Economic
(last 3 measures had many sub-measures)

BANKADVISOR
Mareschal & Brans, EJOR [1991]

use PROMETHEE as a bank DSS

evaluate firms relative to their competitors
input balance sheets, income statements (4 yr)
identify ratios
management
commercial
industrial
financial

BANKADVISOR
PHASE I: display firm financial data
firm specific

PHASE II: industrial evaluation

comparative

each firm an alternative

criteria types:
solvency rations
liquidity ratios
profitability ratios
management ratios

Croatian Highways
Mladineo, Lozic, Stosic, Mlinaric & Radica, EJOR [1992]

pick highway route

4 alternatives (2 coastal, 2 inland)
interdisciplinary
local interests
social interests

Croatian Highways

27 criteria
TRAFFIC
ENGINEERING/TECHNICAL
CIVIL ENGINEERING
DEMOGRAPHIC
ENVIRONMENTAL
SOCIO-ECONOMIC

Jordanian Water
Abu-Taleb & Mareschal EJOR [1995]

18 CRITERIA:
over time, government had developed 18
these prioritized by PROMETHEE II study
groundwater quality, quantity, extractions
conservation, cost, supply, efficiency
sanitation, output value, surface quality& quantity
irrigated area, energy, land quality, sedimentation, recreation, air
quality, foreign labor

Jordanian Water
Constraints

capital budget
operating budget
geographical dispersion
incompatability (bar overlapping combinations)

PROMETHEE V gives optimal portfolio with net

flows as objective function coefficients

Conclusions
Multiple attributes can be important in
many categories of decision making
A number of techniques exist
Systematic
As objective as possible
Preference of decision maker inherently
subjective