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Analytic Hierarchy Process Multi-criteria decision making.
Analytic Hierarchy Process
Multi-criteria decision
making.
The Analytic Hierarchy Process (AHP)  It is popular and widely used method for multi-criteria decision
The Analytic Hierarchy Process
(AHP)
 It is popular and widely used
method for multi-criteria decision
making.
 Allows the use of qualitative, as
well as quantitative criteria in
evaluation.
 Founded by Saaty in 1980.
2
Typical application areas  Resource allocation  Hiring, evaluating and promoting employees  TQM  Strategic
Typical application areas
 Resource allocation
 Hiring, evaluating and promoting employees
 TQM
 Strategic planning
 Relocation decisions
 Vendor selection
 Evaluating mergers and acquisitions
 Selecting a car for purchasing
 Deciding upon a place to visit for vacation
 Deciding upon an MBA program after
graduation.
How widespread is its use? IBM NASA Goodyear IRS FBI .. a few of the Ford
How widespread is its use?
IBM
NASA
Goodyear
IRS
FBI
..
a
few of the
Ford Motor
Co.
thousands of
organizations using
AHP and EC
Citibank
Xerox
Boeing
AT&T
Department
of Defense
World Bank
Texaco
Eastman
Kodak
General
Inter-
Motors
American
Bank
AHP-General Idea  Develop an hierarchy of decision criteria and define the alternative courses of actions.
AHP-General Idea
 Develop an hierarchy of decision criteria and
define the alternative courses of actions.
 AHP algorithm is basically composed of two
steps:
1. Determine the relative weights of the decision
criteria
2. Determine the relative rankings (priority) of
alternatives
!
Both qualitative and quantitative
information can be compared using informed
judgements to derive weights and priorities.
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Example: Car Selection  Objective ◦ Selecting a car  Criteria ◦ Style, Reliability, Fuel-economy Cost?
Example: Car Selection
 Objective
◦ Selecting a car
 Criteria
◦ Style, Reliability, Fuel-economy
Cost?
 Alternatives
◦ Civic Coupe, Saturn Coupe, Ford
Escort, Mazda Miata
6
Analytic Hierarchy Process ► Step 1: Structure a hierarchy. Define the problem, determine the criteria and
Analytic Hierarchy Process
► Step 1: Structure a hierarchy. Define the
problem, determine the criteria and identify
the alternatives.
Overall Goal
Select
Select the
the Best
Best Toothbrush
Toothbrush Manufacturer
Manufacturer
Criteria
Cost
Cost
Reliability
Reliability
Delivery
Delivery Time
Time
Cornell
Cornell
Cornell
Cornell
Cornell
Cornell
Decision
Brush Pik
Brush Pik
Brush Pik
Brush Pik
Brush Pik
Brush Pik
Alternatives
Picobuy
Picobuy
Picobuy
Picobuy
Picobuy
Picobuy
Hierarchy tree S e lec tin g a N e w C a r S tyle
Hierarchy tree
S e lec tin g
a
N
e w
C
a
r
S tyle
R e lia b ility
F
u
e
l
E co n o m
y
Civic
Saturn
Escort
Miata
Alternative courses of action
8
Analytic Hierarchy Process  Step 2: Make pairwise comparisons. Rate the relative importance between each pair
Analytic Hierarchy Process
 Step 2: Make pairwise comparisons.
Rate the relative importance between
each pair of decision alternatives and
criteria.
Analytic Hierarchy Process  Step 2 (cont’d): AHP uses 1-9 scale for the prioritization process. Numerical
Analytic Hierarchy Process
 Step 2 (cont’d): AHP uses 1-9 scale for the
prioritization process.
Numerical
Verbal judgments
ratings
1
Equally important
(preferred)
3
Moderately more important
5
Strongly more important
7
Very strongly more
important
9
Extremely more important
11
11
Analytic Hierarchy Process  Step 2 (cont’d): Intermediate numerical ratings of 2, 4, 6, and 8
Analytic Hierarchy Process
Step
2
(cont’d):
Intermediate
numerical ratings of 2, 4, 6, and 8 can
be
assigned.
If
someone
could
not
decide
whether
one
criterion
(alternative)
is
moderately
more
important
than
the
other
one
or
strongly
more
important
than
the
other
one,
4
(moderately
to
strongly more important) can be
assigned.
Analytic Hierarchy Process  Step 3: Synthesize the results to determine the best alternative. Obtain the
Analytic Hierarchy Process
 Step
3:
Synthesize
the
results
to
determine the best alternative. Obtain
the final results.
 The
output
of
AHP
is
the
set
of
priorities of the alternatives.
An Example with AHP
An Example with AHP
Choosing the most satisfied school  Goal: To select new car.  Criteria: price, MPG, comfort
Choosing the most satisfied
school
 Goal: To select new car.
 Criteria: price, MPG, comfort and
style
 Alternatives: car A, car B, car C
Hierarchy Development  The first step in the AHP is to develop a graphical representation of
Hierarchy Development
 The first step in the AHP is to develop a
graphical representation of the problem in
terms of the overall goal, the criteria, and
the decision alternatives.
Overall Goal:
Select the Best Car
Criteria:
Price
MPG
Comfort
Style
Decision
Car A
Car A
Car A
Car A
Alternatives:
Car B
Car B
Car B
Car B
Car C
Car C
Car C
Car C
Example: Synthesizing Procedure - 1 Step 1: Sum the values in each column. Comfort Car A
Example: Synthesizing
Procedure - 1
Step 1: Sum the values in each column.
Comfort
Car A
Car B
Car C
Car A
1
2
8
Car B
1/2
1
6
Car C
1/8
1/6
1
Column totals
13/8
19/6
15
Example: Synthesizing Procedure - 2 Step 2: Divide each element of the matrix by its column
Example: Synthesizing
Procedure - 2
Step 2: Divide each element of the matrix by
its column total.
◦ All columns in the normalized pairwise
comparison matrix now have a sum of 1.
Comfort
Car A
Car B
Car C
Car A
8/13
12/19
8/15
Car B
4/13
6/19
6/15
Car C
1/13
1/19
1/15
Example: Synthesizing Procedure - 3 Step 3: Average the elements in each row. ◦ The values
Example: Synthesizing
Procedure - 3
Step 3: Average the elements in each row.
◦ The values in the normalized pairwise
comparison matrix have been converted
to decimal form.
◦ The result is usually represented as the
(relative) priority vector (eigen vector).
Comfort
Car A
Car B
Car C
Row Avg.
Car A
0.615
0.632
0.533
0.593
 0.593 
0.341
Car B
0.308
0.316
0.400
0.341
  0.066  
Car C
0.077
0.053
0.067
0.066
Total
1.000
Consistency - 1  An important consideration in terms of the quality of the ultimate decision
Consistency - 1
 An important consideration in terms of
the quality of the ultimate decision
relates to the consistency of
judgments that the decision maker
demonstrated during the series of
pairwise comparisons.
◦ It should be realized perfect consistency is
very difficult to achieve and that some lack
of consistency is expected to exist in
almost any set of pairwise comparisons.
◦ Example:
Consistency - 2  To handle the consistency question, the AHP provides a method for measuring
Consistency - 2
 To handle the consistency question,
the AHP provides a method for
measuring the degree of consistency
among the pairwise judgments
provided by the decision maker.
◦ If the degree of consistency is acceptable,
the decision process can continue.
◦ If the degree of consistency is
unacceptable, the decision maker should
reconsider and possibly revise the pairwise
comparison judgments before proceeding
with the analysis.
Consistency Ratio  The AHP provides a measure of the consistency of pairwise comparison judgments by
Consistency Ratio
 The AHP provides a measure of
the consistency of pairwise
comparison judgments by
computing a consistency ratio
◦ The ratio is designed in such a way
that values of the ratio exceeding
0.10 are indicative of inconsistent
judgments.
◦ Although the exact mathematical
computation of the consistency ratio
is beyond the scope of this text, an
a
roximation of the ratio can be
Procedure: Estimating Consistency Ratio - 1 Step 1: Multiply each value in the first column of
Procedure: Estimating Consistency
Ratio - 1
Step 1: Multiply each value in the first
column of the pairwise comparison
matrix by the relative priority of
the first item considered. Same
procedures for other items. Sum
the values across the rows to
obtain a vector of values labeled
“weighted sum.”
Step 2: Divide the elements of the
vector of weighted sums obtained
in Step 1 by the corresponding
priority value.
Step 3: Compute the average of the
Procedure: Estimating Consistency Ratio - 2 Step 4: Compute the consistency index (CI): λ  n
Procedure: Estimating Consistency
Ratio - 2
Step 4: Compute the consistency index
(CI):
λ
n
max
CI 
n
1
Where n is the number of items being
compared
CI
Step 5: Compute the consistency ratio
CR 
RI
(CR):
Where RI is the random index, which is the
consistency index of a randomly generated
pairwise comparison matrix. It can be shown
Random Index  Random index (RI) is the consistency index of a randomly generated pairwise comparison
Random Index
 Random index (RI) is the consistency
index of a randomly generated pairwise
comparison matrix.
RI depends on the number of elements
being compared (i.e., size of pairwise
comparison matrix) and takes on the
n
following values:
1 2
3 4
5 6
7
8 9
10
RI
0.00 0.00
0.58 0.90
1.12 1.24
1.32 1.41
1.45
1.49
Example: Inconsistency Preferences: If, A  B (2); B  C (6) Then, A  C
Example: Inconsistency
Preferences: If, A  B (2); B  C (6)
Then, A  C (4) (should be 8)
 Inconsistency
Comfort
Car A
Car B
Car C
Car A
1
2 8
Car B
1/2
1
6
Car C
1/8
1/6
1
Example: Consistency Checking - 1 Step 1: Multiply each value in the first column of the
Example: Consistency Checking
- 1
Step 1: Multiply each value in the first column of the
pairwise comparison matrix by the relative
priority of the first item considered. Same
procedures for other items. Sum the values
across the rows to obtain a vector of values
labeled “weighted sum.”
 1
2 
 8 
 0.593 
 0.682 
 0.528 
 1.803 
0.593
1 2
 0.341
1
 0.066
6
0.297
0.341
0.396
1.034
1
1
1
  0.074  
  0.057  
  0.066  
  0.197  
 
8  
 
6  
 
 
Example: Consistency Checking - 2 Step 2: Divide the elements of the vector of weighted sums
Example: Consistency Checking
- 2
Step 2: Divide the elements of the vector of
weighted sums by the corresponding
priority value.
 1.803
0.593 
 3.040 
1.034 0.341
3.032
  0.197 0.066  
  2.985  
Step 3: Compute the average of the values computed in
step 2 ( max ).
3.040
3.032
2.985
 3.019
λ max
3
Example: Consistency Checking - 3 Step 4: Compute the consistency index (CI). λ  n 3.019
Example: Consistency Checking
- 3
Step 4: Compute the consistency index (CI).
λ
n
3.019
3
max
CI 
 0.010
n
1
3
1
Step 5: Compute the consistency ratio (CR).
CI
0.010
CR 
0.017
0.10
RI
0.58
The degree of consistency exhibited in the pairwise comparison
matrix for comfort is acceptable.
Development of Priority Ranking  The overall priority for each decision alternative is obtained by summing
Development of Priority
Ranking
 The overall priority for each
decision alternative is obtained
by summing the product of the
criterion priority (i.e., weight)
(with respect to the overall goal)
times the priority (i.e.,
preference) of the decision
alternative with respect to that
criterion.
 Ranking these priority values, we
will have AHP ranking of the
Example: Priority Ranking – 0A Step 0A: Other pairwise comparison matrices Comfort Car A Car B
Example: Priority Ranking – 0A
Step 0A: Other pairwise comparison
matrices
Comfort
Car A
Car B
Car C
Car A
Car B
Car C
Car A
1
2
8
Car A
1
1/3
¼
Criterio
Price
MPG
Comfort
Style
n
Car B
1/2
1
6
Car B
3
1
½
Price
Car C
1/8
1/6
1
1
Car C
3
2
4
2
2
MPG
1/3
1
1/4
1/4
MPG
Car A
Car B
Car C
Style
Car A
Car B
Car C
Comfort
1/2
4
1
1/2
Car A
1
1/4
1/6
Car A
1
1/3
4
Style
1/2
4
2
1
Car B
4
1
1/3
Car B
3
1
7
Car C
6
3
Car C
1/4
1/7
Ranking of Criteria Criterion Price MPG Comfort Style Criterion Price MPG Comfort Style Price 1 3
Ranking of Criteria
Criterion
Price
MPG
Comfort
Style
Criterion
Price
MPG
Comfort
Style
Price
1
3
2
2
Price
3/12
8/21
8/15
MPG
1/3
1
1/4
1/4
MPG
1/7
1/12
1/21
1/15
Comfort
1/2
4
1
1/2
Comfort
3/14
4/12
4/21
2/15
Style
1/2
4
2
1
Style
3/14
4/12
8/21
4/15
Column
7/3
12
21/4
15/4
total
Criterion
Criterion
Price
MPG
Comfort
Style
Row
Price
 0.398 
Average
MPG
0.085
Price
0.25
0.38
0.53
0,398
 0.398 
Comfort
MPG
0.143
0.083
0.048
0.067
0,085
0.085
 0.218 
Style
Comfort
0.214
0.33
0.19
0.133
0,218
 0.218 
0.299
Style
0.214
0.33
0.381
0.267
0,299
0.299
32
Example: Priority Ranking – 0B Step 0B: Calculate priority vector for each matrix. Price MPG Comfort
Example: Priority Ranking – 0B
Step 0B: Calculate priority vector for each
matrix.
Price
MPG
Comfort
Style
Criterion
Car A
Price
 0.123 
 0.087 
 0.593 
 0.265 
MPG
Car B
 0.398 
0.320
0.274
0.341
0.655
0.085
Comfort
Car C
  0.557  
  0.639  
  0.066  
  0.080  
Style
 0.218 
0.299
Comfort
Car A
Car B
Car C
Row Avg.
 0.593 
Car A
0.615
0.632
0.533
0.593
0.341
Car B
0.308
0.316
0.400
0.341
0.066
 
 
Car C
0.077
0.053
0.067
0.066
Total
1.000
Ranking of Criteria Selecting a New Car 1.00 Comfort Price MPG Style 0.218 0.398 0.085 0.299
Ranking of Criteria
Selecting a New Car
1.00
Comfort
Price
MPG
Style
0.218
0.398
0.085
0.299
Car A
 0.593 
Car A
 0.123 
Car A
 0.087 
Car A
 0.265 
Car B
0.341
Car B
0.320
Car B
0.274
Car B
0.655
Car C
  0.066  
Car C
  0.557  
Car C
  0.639  
Car C
  0.080  
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Ranking of Alternative Price MPG Comfort Style Criterion Car A Price  0.123   0.087
Ranking of Alternative
Price
MPG
Comfort
Style
Criterion
Car A
Price
 0.123 
 0.087 
 0.593 
 0.265 
 0.398 
MPG
Car B
0.320
0.274
0.341
0.655
0.085
Comfort
Car C
  0.557  
  0.639  
  0.066  
  0.080  
 0.218 
Style
0.299
 0.398 
Car A  0.123 0.087 0.593 0.265 
 0.265 
0.085
Car B
0.320 0.274 0.341 0.655
x
=
0.527
Car B is the
 0.218 
  0.338  
Car C   0.557 0.639 0.066 0.080  
best alternative
0.299
Priority matrix
Criteria Weights
35
Price
MPG
Comfo
rt
Style
Complex decisions • Many levels of criteria and sub-criteria exists for complex problems. 36
Complex decisions
• Many levels of criteria and sub-criteria exists for
complex problems.
36
AHP Software: Professional commercial software Expert Choice developed by Expert Choice Inc. is available which simplifies
AHP Software:
Professional commercial software Expert
Choice developed by Expert Choice Inc. is
available which simplifies the implementation
of the AHP’s steps and automates many of its
computations
◦ computations
◦ sensitivity analysis
◦ graphs, tables
37
More about AHP: Pros and Cons AHP is technique for formalizing decision making such that •It
More about AHP: Pros and Cons
AHP is technique for formalizing decision making such that
•It is applicable when it is difficult to formulate criteria evaluations, i.e., it allows
qualitative evaluation as well as quantitative evaluation.
•It is applicable for group decision making environments
However
•There are hidden assumptions like consistency
•Difficult to use when there are large number of evaluations
Use constraints to
Use GDSS
eliminate some
alternatives
•Difficult to add a new criterion or alternative
ratio if applicable
Use cost/benefit
•Difficult to take out an existing criterion or alternative, since
the best alternative might differ if the worst one is excluded.
38
Group Decision Making The AHP allows group decision making, where group members can use their experience,
Group Decision Making
The AHP allows group decision making, where group members can use their
experience, values and knowledge to break down a problem into a hierarchy
and solve. Doing so provides:
 Understand the conflicting ideas in the organization and try to reach a
consensus.
 Minimize dominance by a strong member of the group.
 Members of the group may vote for the criteria to form the AHP tree.
(Overall priorities are determined by the weighted averages of the priorities
obtained from members of the group.)
However;
The GDSS does not replace all the requirements for group decision making.
Open meetings with the involvement of all members are still an asset.
39
References Al Harbi K.M.A.S. (1999), Application of AHP in Project Management, International Journal of Project Management,
References
Al Harbi K.M.A.S. (1999), Application of AHP in Project Management, International
Journal of Project Management, 19, 19-27.
Haas R., Meixner, O., (2009) An Illustrated Guide to the Analytic Hierarchy Process,
Lecture Notes, Institute of Marketing & Innovation, University of Natural Resources
and http://www.boku.ac.at/mi/
Saaty, T.L., Vargas, L.G., (2001), Models, Methods, Concepts & Applications of the
Analytic Hierarchy Process, Kluwer’s Academic Publishers, Boston, USA.
40
Exercise 41
Exercise
41
Case A motorist is using the AHP to choose a new car from three possible models:
Case
A motorist is using the AHP to choose a new car from three possible
models: an Arrow, a bestmobile and a commuter. The choice will be
based on just two attributes: cost and style. The motorist considers
that cost is weakly more important than style.
When asked to compare the costs of the cars, the motorist makes
the followig statements: on cost, the bestmobile is weakly preferred
to the arrow, but the arrow is weakly preferred to the commuter. Also
the bestmobile is extremely preferred to the commuter.
On style, the arrow is very strongly preferred to the bestmobile, but
the commuter is weakly preferred to the arrow. Also the commuter is
extremely preferred to the bestmobile.
a.
Construct a hierarchy to represent the decision problem
b.
Calculate the weight for each table in hierarchy and hence
determine which car should be purchased
c.
Calculate the inconsistency ratios for the motorist comparisons of
the cars on (i) cost and (ii) style and interpret your results
42