Selection of B-School

Selection of B-School

Academic Reputation Location Placement Performance Average Salary at the Entry Level

Whom to Marry

Whom to Marry

Flexibility Independence Commitment Humor Intelligent Physical Socio-Cultural and many others

The Analytic Hierarchy Process (AHP)

It is designed for situations in which ideas, feelings, and emotions affecting the decision process are quantified to provide a numeric scale for prioritizing the alternatives.

Do Numbers Have an Objective Meaning?

Sheep: 2 sheep (1 big, 1 little) Temperature: 30 degrees Fahrenheit to Indian, African, Eskimo

Since we deal with Non-Unique Scales such as [lbs., kgs], [yds, meters], [Fahr., Celsius] and such scales cannot be combined.

Arent Numbers Numbers? We have the habit to crunch numbers whatever they are
Greater Noida Population 107676 Feet Above Sea Level 639 Distance from New Delhi 40 In Kms Total 108355

Nonmonotonic Relative Nature of Absolute Scales

100

Good for preserving food Bad for preserving food Good for preserving food

Bad for comfort Good for comfort Bad for comfort

Temperature

Most Decision Problems are Multicriteria

Maximize profits

Satisfy customer demands Maximize employee satisfaction Satisfy shareholders Minimize costs of production Satisfy government regulations Minimize taxes Maximize bonuses and many

Making a Decision

B is cheaper than A A is better than B

Which would you choose?

Basic Decision Problem

Criteria: Car: Alternatives: Low Cost > Operating Cost > Style A V B B V A B V A

Suppose the criteria are preferred in the order shown and the cars are preferred as shown for each criterion. Which car should be chosen? It is desirable to know the strengths of preferences for tradeoffs.

Pair-wise Comparison

Taste, Aroma, ripeness, size of types of apple

Pair-wise Comparison

Which drink is consumed most in a Delhi based Hotel: coffee, tea, soda, milk, water

Pair-wise Comparison

School selection: Academic reputation, location

Pair-wise Comparison

Evaluation of employees for promotion:

dependability, education, experience, quality, attitude, leadership

Pair-wise Comparison
Choose best oven:
function, economy, safety and reliability, convenience

Pair-wise Comparison
Whom to marry:
flexibility, independence, commitment, humor, intelligence, physical, socio-cultural

Pair-wise Comparison

Selection job: salary, quality of job, interest in job, nearness to home

Who is better Chief Minister ?

Rank

Who is better?

The Analytic Hierarchy Process (AHP)

Decision Making involves setting priorities and the AHP is the methodology for doing that. It is designed for situations in which ideas, feelings, and emotions affecting the decision process are quantified to provide a numeric scale for prioritizing the alternatives.

Hierarchic Thinking
CRITERIA

GOAL

ALTERNATIVES

Relative Measurement The Process of Prioritization

In relative measurement a preference, judgment is expressed on each pair of elements with respect to a common property they share. In practice this means that a pair of elements in a level of the hierarchy are compared with respect to parent elements to which they relate in the level above.

Relative Measurement (cont.)

If, for example, we are comparing two apples according to size we ask: Which apple is bigger? How much bigger is the larger than the smaller apple? Use the smaller as the unit and estimate how many more times bigger is the larger one.

Comparison Matrix
Given: Three apples of different sizes.

Apple A Apple B Apple C We Assess Their Relative Sizes By Forming Ratios

Size Comparison Apple A

Apple A S1/S1

Apple B S1/S2

Apple C S1/S3

Apple B
Apple C

S2 / S1
S3 / S1

S2 / S2
S3 / S2

S2 / S3
S3 / S3

Pairwise Comparisons
Size
Apple A
Size Comparison Apple A

Apple B
Apple B

Apple C
Apple C
Resulting Priority Eigenvector Relative Size of Apple

Apple A

6/10

Apple B

1/2

3/10

Apple C

1/6

1/3

1/10

When the judgments are consistent, as they are here, any normalized column gives the priorities.

Analytical Hierarchy Process

In many situations one may not be able to assign weights to the different decision factors. Therefore one must rely on a technique that will allow the estimation of the weights.
One such process, The Analytical Hierarchy Process (AHP), involves pair wise comparisons between the various factors.

Analytical Hierarchy Process

(cont.)

The process is started by the decision maker creating the value tree associated with the problem.
They proceed by carrying out pairwise comparisons, both between
Alternatives on each factor, and Factors at a given node.

Job Selection through AHP

Ms. X is about to graduate from college and is trying to determine which job offer to accept. She plans to choose between three offers by determining how well each offer meets the following criteria (objectives): High starting salary Quality of life in city where job is located Interest of work Nearness of job to family

Assumptions

Ms. X has hard time in prioritizing those criteria. In other words, she needs to find one way to decide the weights for those criteria. AHP provides such a function.

Determine the problem

What job offer will give Ms. X possibly highest satisfaction? Structure the hierarchy by putting the top objective (satisfaction with job), criteria, and alternatives as follows.

Structure of the Problem

Satisfaction with a Job

Starting Salary

Life Quality

Interest

Nearness to Family

Job A

Job B

Job C

Structure of the Problem

Satisfaction with a Job

Starting Salary

Life Quality

Interest

Nearness to Family

Job A

Job B

Job C

The Principle of the AHP

The principle of the AHP relies on the pair-wise comparison. This comparison is carried out using a scale from 1 to 9 as follows:

1 Equally preferred 2 Equally to Moderately preferred 3 Moderately preferred 4 Moderately to Strongly preferred 5 Strongly preferred 6 Strongly to Very Strongly preferred 7 Very Strongly preferred 8 Very strongly to Extremely preferred 9 Extremely preferred

A pair-wise comparison matrix for the criteria level

1 Equally preferred 2 Equally to Moderately preferred 3 Moderately preferred 4 Moderately to Strongly preferred 5 Strongly preferred 6 Strongly to Very Strongly preferred 7 Very Strongly preferred 8 Very strongly to Extremely preferred 9 Extremely preferred

Satisfaction with a job

Starting Salary

Quality of life in city

Interest of work

Nearness of job to family

Starting Salary

Quality of life in city

Interest of work

Nearness of job to family

36

A pair-wise comparison matrix for the criteria level

1 Equally preferred 2 Equally to Moderately preferred 3 Moderately preferred 4 Moderately to Strongly preferred 5 Strongly preferred 6 Strongly to Very Strongly preferred 7 Very Strongly preferred 8 Very strongly to Extremely preferred 9 Extremely preferred

Satisfaction with a job

Salary

Quality

Interest

Nearness

Salary

Quality

1/5

1/2

1/2

Interest

1/2

Nearness

1/4

1/2

37

A pair-wise comparison matrix for the criteria level

Satisfaction with a Job

Salary Quality Interest Nearness 1 1/ 5 1/ 2 1/ 4 5 1 2 2 2 1/ 2 1 1/ 2 4 1/ 2 2 1

Salary Quality Interest Nearness

Using the same steps to determine the score of each alternative on each criterion, pairwise matrix is constructed as follows:

Salary Job A A1 Job B Job C

Job A Job B Job C 1 2 4 1/ 2 1 2 1/ 4 1/ 2 1

Quality Job A A2 Job B Job C

Job A Job B Job C

Interest Job A A3 Job B Job C

Job A Job B Job C

Nearness Job A A4 Job B Job C

Job A Job B Job C

Consistency of the Comparison Matrix

If all the columns of the normalized matrix are identical, then the original matrix is said to be consistent
R A= R L 1
1/5

L 5 1

is a Consistent matrix

Consistency implies coherent judgment on the part of the decision maker regarding the pair-wise comparisons. Mathematically, A is consistent if

Consistency of the Comparison Matrix

It is unusual for all comparison matrices to be consistent. Indeed, given that human judgment is the basis of the construction of these matrices, some reasonable degree of inconsistency is expected and tolerated. Letting be the computed average vector of the normalized matrix of the pair-wise inconsistent comparison matrix, we calculate

Consistency Ratio

Admission in to Management Institute

Ms. Y has received intimation from three Management institutions A, B, C to take admission. She specifies two main criteria location and academic reputation. Being the excellent student she is, she judges academic reputation to be five times as important as location. Using the symbols R and L to represent reputation and location, the associated comparison matrix is given as
R
A= R L 1
1/5

L
5 1

Example Contd.

The relative weights of the alternatives of A,B and C within each of the L and R criteria, whose elements are based on Ms Xs judgment regarding the relative importance are as follows:
L A AL= B C A 1 2 5 B C A AR= B C A 1 1/2 B 2 1 C 3 3/2 1

1/2 1/5 1 2 1/2 1

1/3 2/3

Publishing of Book

A new author sets three criteria for selecting a publisher for a Management Science book: royalty percentage(R), Marketing (M), and advance payment (A).Two publishers H and P, have expressed interest in the book. Using the following comparison matrices, rank the two publishers and asses the consistency of the decision.
R R A= M 1 1 M 1 1 A 1/4 1/5

1
48

H AR= H 1

P 2 AM= H P

H 1 2

P 1/2 1

1/2

1
H AA= H 1 P 1

49