SUMMER SCHOOL 19-21 September 2007 Gaeta (LT

)

The Analytic Hierarchy Process (AHP) for Decision Making

PROF. THOMAS L. SAATY (University Of Pittsburgh – Pennsylvania – USA)

The Analytic Hierarchy Process (AHP) for Decision Making
Decision Making involves setting priorities and the AHP is the methodology for doing that.

Decision Making
1) Precedes Creative Thinking to determine which area to brainstorm first 2) It also follows Creative Thinking to determine which avenues to specialize in first for implementation needs

Creative Thinking
Precedes Decision Making to brainstorm, connect and organize the criteria needed to make a decision

Problem Solving
Creative Thinking and Decision Making are the corner stones of Problem Solving

Decision Making
Present and likely future?

Creative Thinking
Problem to solve? Opportunity to seize? Best action? Resource allocation? Solution Strategy What to brainstorm? How to structure?

Problem Solving
Remove obstacles

Opportunity Finding
Help to add value

Implementation • Design, Planning and Action
• Physical (engineering) and Behavioral (management)

A Simple Example of Ranking
You have five people ranked on three criteria: age (in years), wealth (in dollars) and health (in relative priorities), how do you determine their overall ranks. Assume, in addition for this exercise, that the younger a person is the more favorable it is for his/her rank with respect to age.

Part 1: Decision Making Challenges
• • • • • Current State of Corporate Decision Making Inefficient Meetings Consequences Benefits From a Structured Process for Decision Making Benefits of SuperDecisions (free!) software

Current State of Corporate Decision Making • At least 50% of all decisions end in failure. • 33% of all decisions made are never implemented. • 50% of decisions implemented are discontinued after 2 years. • 66% of decisions are based on failure prone methods. • Decisions using high participation succeed 80% of the time but occurs only 20% of the time. • Practically every decision failure is preventable
Source: Why Decisions Fail - Author Paul Nut - Publisher; Berret & Koehler 2002 20 year study of over 400 business decisions from Public, Private and NotFor Profit organizations in the United States, Canada & Europe.

Current State of Corporate Decision Making

• Only 37% of decision makers said they have a clear understanding of what their organization is trying to achieve. • Only 1 in 5 was enthusiastic about their team’s and organization’s goals. • Only 1 in 5 said they have a clear line of site between their tasks and their organization’s goals.
SOURCE: Harris Poll of 23,000 respondents

Inefficient Meetings
• 11 Million meetings in the U.S. per day • Most professionals attend a total of 61.8 meetings per month • Research indicates that over 50 percent of this meeting time is wasted • Professionals lose 31 hours per month in unproductive meetings, or approximately four work days
• • A network MCI Conferencing White Paper. Meetings in America: A study of trends, costs and attitudes toward business travel, teleconferencing, and their impact on productivity (Greenwich, CT: INFOCOMM, 1998), 3. Robert B. Nelson and Peter Economy, Better Business Meetings (Burr Ridge, IL: Irwin Inc, 1995), 5.

Benefits from Structured Decision Making
• • • • • Increase the success of decisions made by at least 50% Increase benefits by blending diverse perspectives Achieve and sustain more excellent operational performance Maximize return on investments in business change Increase business leadership and stakeholder confidence and commitment • Achieve more consistent business performance • Sustain increasing business prosperity

Source: Why Decisions Fail - Author Paul Nut - Publisher; Berret & Koehler 2002 20 year study of over 400 business decisions from Public, Private and Not-For Profit organizations in the United States, Canada & Europe.

Benefits of Systematic Decision Making
• Rapidly build consensus on goals, objectives and priorities • Align work activities to what is important for organizational success • Objectives based budgeting versus resource based budgeting (save the salami and peanut butter for lunch) • Get past corporate stovepipes (tear down the walls)

Benefits of Systematic Decision Making (cont’d)

• Improve speed and effectiveness of decision making • Synthesize existing corporate data with management priorities • Achieve buy-in on major corporate decisions • Improve accountability and outcomes over time • Achieve cost savings through efficient allocation of resources

Real Life Problems Exhibit:
Strong Pressures and Weakened Resources Complex Issues - Sometimes There are No “Right” Answers Vested Interests Conflicting Values

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

Knowledge is Not in the Numbers
Isabel Garuti is an environmental researcher whose father-in-law is a master chef in Santiago, Chile. He owns a well known Italian restaurant called Valerio. He is recognized as the best cook in Santiago. Isabel had eaten a favorite dish risotto ai funghi, rice with mushrooms, many times and loved it so much that she wanted to learn to cook it herself for her husband, Valerio’s son, Claudio. So she armed herself with a pencil and paper, went to the restaurant and begged Valerio to spell out the details of the recipe in an easy way for her. He said it was very easy. When he revealed how much was needed for each ingredient, he said you use a little of this and a handful of that. When it is O.K. it is O.K. and it smells good. No matter how hard she tried to translate his comments to numbers, neither she nor he could do it. She could not replicate his dish. Valerio knew what he knew well. It was registered in his mind, this could not be written down and communicated to someone else. An unintelligent observer would claim that he did not know how to cook, because if he did, he should be able to communicate it to others. But he could and is one of the best.

Knowing Less, Understanding More
You don’t need to know everything to get to the answer. Expert after expert missed the revolutionary significance of what Darwin had collected. Darwin, who knew less, somehow understood more.

Aren’t Numbers Numbers? We have the habit to crunch numbers whatever they are
An elderly couple looking for a town to which they might retire found Summerland, in Santa Barbara County, California, where a sign post read: Summerland
Population Feet Above Sea Level Year Established 3001 208 1870

Total 5079

“Let’s settle here where there is a sense of humor,” said the wife; and they did.

Do Numbers Have an Objective Meaning?
Butter: 1, 2,…, 10 lbs.; 1,2,…, 100 tons Sheep: 2 sheep (1 big, 1 little) Temperature: 30 degrees Fahrenheit to New Yorker, Kenyan, Eskimo Since we deal with Non-Unique Scales such as [lbs., kgs], [yds, meters], [Fahr., Celsius] and such scales cannot be combined, we need the idea of PRIORITY. PRIORITY becomes an abstract unit valid across all scales. A priority scale based on preference is the AHP way to standardize non-unique scales in order to combine multiple criteria.

Stability, Objectivity, and Measurement
We deal with many things whose stimuli are qualitative and change according to our state of mind and our judgment about them is variable and unstable and subjective. For some things we have created scales of measurement that enable us to get the same readings at any time no matter who we are. But the readings have to be interpreted as to their significance, importance or priority. We call such things tangibles. How can we deal with intangibles as we experience them directly like the color red from sense data, beauty as we see a work of art and respond to it using experience, or goodness and love that are abstract modes of behavior? We can compare one shade of red with another, one object of beauty with another, and one act of goodness or love with another according to our preference or sense of importance or likelihood of occurrence. The comparisons yield relative magnitudes of dominance that are stable at the time we do them and we can also compare them with what other people get in their evaluation.

Nonmonotonic Relative Nature of Absolute Scales
Good for preserving food
100

Bad for comfort

Bad for preserving food

Good for comfort

Good for preserving food

0

Bad for comfort

Temperature

OBJECTIVITY!?
Bias in upbring: objectivity is agreed upon subjectivity. We interpret and shape the world in our own image. We pass it along as fact. In the end it is all obsoleted by the next generation. Logic breaks down: Russell-Whitehead Principia; Gödel’s Undecidability Proof. Intuition breaks down: circle around earth; milk and coffee. How do we manage?

Organizing the Ways to Access, Connect, and Prioritize Information
• We cannot use randomly gathered information very well without thinking in organized ways. The best way to use the plethora of sporadic, randomly acquired information in our memories is to create well-organized complex structures and represent the basic concepts with criteria and alternatives with which such information deals and then do prioritization to determine what is important and what is not. We quickly learn that we know much to use in predicting what happens in the real world than we can do without such systematic ways to represent understanding. We have no better ways to do it. The modern computer is a gift that we can use to deal with complexity to enhance the power of our minds. Without them it is extremely difficult to mange complexity in the integrated ways that now we can. It is a new revolution for better decision making.

Making a Decision

Widget B is cheaper than Widget A Widget A is better than Widget B

Which Widget 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.

To understand the world we assume that:
We can describe it We can define relations between its parts and We can apply judgment to relate the parts according to a goal or purpose that we have in mind.

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. • The apples must be relatively close (homogeneous) if we hope to make an accurate estimate.

Relative Measurement (cont.)
•The Smaller apple then has the reciprocal value when compared with the larger one. There is no way to escape this sort of reciprocal comparison when developing judgments •If the elements being compared are not all homogeneous, they are placed into homogeneous groups of gradually increasing relative sizes (homogeneous clusters of homogeneous elements). • Judgments are made on the elements in one group of small elements, and a “pivot” element is borrowed and placed in the next larger group and its elements are compared. This use of pivot elements enables one to successively merge the measurements of all the elements. Thus homogeneity serves to enhance the accuracy of measurement.

Pairwise Comparisons
Size Apple A
Size Comparison Apple A

Apple B
Apple B

Apple C
Apple C

Apple A Apple B Apple C

S1/S1 S2/S1 S3/S1

S1/S2 S2/S2 S3/S2

S1/S3 S2/S3 S3/S3

We Assess The Relative Sizes of the Apples By Forming Ratios

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

1

2

6

6/10

A

Apple B

1/2

1

3

3/10

B

Apple C

1/6

1/3

1

1/10

C

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

Consistency (cont.)
• Consistency itself is a necessary condition for a better understanding of relations in the world but it is not sufficient. For example we could judge all three of the apples to be the same size and we would be perfectly consistent, but very wrong. • We also need to improve our validity by using redundant information. • It is fortunate that the mind is not programmed to be always consistent. Otherwise, it could not integrate new information by changing old relations.

Consistency
In this example Apple B is 3 times larger than Apple C. We can obtain this value directly from the comparisons of Apple A with Apples B & C as 6/2 = 3. But if we were to use judgment we may have guessed it as 4. In that case we would have been inconsistent. Now guessing it as 4 is not as bad as guessing it as 5 or more. The farther we are from the true value the more inconsistent we are. The AHP provides a theory for checking the inconsistency throughout the matrix and allowing a certain level of overall inconsistency but not more.

Consistency (cont.)
Because the world of experience is vast and we deal with it in pieces according to whatever goals concern us at the time, our judgments can never be perfectly precise. It may be impossible to make a consistent set of judgments on some pieces that make them fit exactly with another consistent set of judgments on other related pieces. So we may neither be able to be perfectly consistent nor want to be. We must allow for a modicum of inconsistency.

Consistency (cont.)
How Much Inconsistency to Tolerate?
• Inconsistency arises from the need for redundancy. • Redundancy improves the validity of the information about the real world. • Inconsistency is important for modifying our consistent understanding, but it must not be too large to make information seem chaotic. • Yet inconsistency cannot be negligible; otherwise, we would be like robots unable to change our minds. • Mathematically the measurement of consistency should allow for inconsistency of no more than one order of magnitude smaller than consistency. Thus, an inconsistency of no more than 10% can be tolerated. • This would allow variations in the measurement of the elements being compared without destroying their identity. • As a result the number of elements compared must be small, i.e. seven plus or minus two. Being homogeneous they would then each receive about ten to 15 percent of the total relative value in the vector of priorities. • A small inconsistency would change that value by a small amount and their true relative value would still be sufficiently large to preserve that value. • Note that if the number of elements in a comparison is large, for example 100, each would receive a 1% relative value and the small inconsistency of 1% in its measurement would change its value to 2% which is far from its true value of 1%.

Pairwise Comparisons using Inconsistent Judgments
Paris London New York

Nicer ambience comparisons

Normalized

Ideal

Paris

1 1/2

2 1

5 3

0.5815

1

London

0.3090 0.5328

New York

1/5

1/3

1

0.1095 0.1888

Pairwise Comparisons using Judgments and the Derived Priorities
B. Clinton M. Tatcher G. Bush

Politician comparisons

Normalized

Total

B. Clinton

1

3

7

0.6220 0.2673

1 0.4297

M. Tatcher

1/3

1

5

G. Bush

1/7

1/5

1

0.1107

0.1780

When the judgments are consistent, we have two ways to get the answer:
1. By adding any column and dividing each entry by the total, that is by normalizing the column, any column gives the same result. A quick test of consistency if all the columns give the same answer. 2. By adding the rows and normalizing the result.

When the judgments are inconsistent we have two ways to get the answer:
1. An approximate way: By normalizing each column, forming the row sums and then normalizing the result. 2. The exact way: By raising the matrix to powers and normalizing its row sums

Comparison of Intangibles
The same procedure as we use for size can be used to compare things with intangible properties. For example, we could also compare the apples for: • TASTE • AROMA • RIPENESS

The Analytic Hierarchy Process (AHP) is the Method of Prioritization
• AHP captures priorities from paired comparison judgments of the • elements of the decision with respect to each of their parent criteria. • Paired comparison judgments can be arranged in a matrix. • • • • Priorities are derived from the matrix as its principal eigenvector, which defines an absolute scale. Thus, the eigenvector is an intrinsic concept of a correct prioritization process. It also allows for the measurement of inconsistency in judgment.

• Priorities derived this way satisfy the property of an absolute scale.

Decision Making
We need to prioritize both tangible and intangible criteria: ♦ In most decisions, intangibles such as • political factors and • social factors take precedence over tangibles such as • economic factors and • technical factors ♦ It is not the precision of measurement on a particular factor that determines the validity of a decision, but the importance we attach to the factors involved. ♦ How do we assign importance to all the factors and synthesize this diverse information to make the best decision?

There are Primitive People Living in our Time Who can’t Count
• I have to tell you something. I did a small research in Papua with the local tribe. These people still live literally in a stone age environment. They do not wear clothes, and many live in the trees and practice cannibalism. They don't speak the Indonesian language. It was so funny that people from the central bank who accompanied me to this region noticed and took a picture where I am holding my laptop interviewing these people using the AHP approach....a combination of stone age respondents with modern technology!!!!. I will send you the photos when I return to Indonesia next month. For this research the AHP questions had to be designed is such that they are very simple yet straight to the most critical points that we want to know about the livelihood of this society. It was a fascinating experience. Those who accompanied me were so impressed with the power of the AHP in conducting research on such a unique society. According to the central bank people who paid attention to my interviews: "....the outcome is clear and quantified, and yet the respondents do not need to have any knowledge about any numbers and their corresponding meaning. What it needs are just their honest perceptions and expressions.” They hardly know how to count. In fact they prefer to have 100
rupiah than 1000 rupiah simply because the color of the money (red) is what they are used to hold. The extra zero on the bill does not mean much to them.

• •

Love, Iwan (Iwan Y. Azis is Indonesia’s greatest economist and is Professor at Cornell University)

Verbal Expressions for Making Pairwise Comparison Judgments
Equal importance Moderate importance of one over another Strong or essential importance Very strong or demonstrated importance Extreme importance

Fundamental Scale of Absolute Numbers Corresponding to Verbal Comparisons
1 3 5 7 9 Equal importance Moderate importance of one over another Strong or essential importance Very strong or demonstrated importance Extreme importance

2,4,6,8 Intermediate values Use Reciprocals for Inverse Comparisons

0.05 0.47

0.10

0.15

0.24

Which Drink is Consumed More in the U.S.?
Drink Consumption in the U.S. Coffee Wine Tea Beer Sodas Milk Water

An Example of Estimation Using Judgments
Coffee 1 1/9 1/5 1/2 1 1 2 Wine 9 1 2 9 9 9 9 Tea 5 1/3 1 3 4 3 9 Beer 2 1/9 1/3 1 2 1 3 Sodas 1 1/9 1/4 1/2 1 1/2 2 Milk 1 1/9 1/3 1 2 1 3 Water 1/2 1/9 1/9 1/3 1/2 1/3 1

The derived scale based on the judgments in the matrix is: Coffee Wine Tea Beer Sodas Milk Water .177 .019 .042 .116 .190 .129 .327 with a consistency ratio of .022. The actual consumption (from statistical sources) is: .180 .010 .040 .120 .180 .140 .330

Estimating which Food has more Protein
Food Consumption in the U.S. A: Steak B: Potatoes C: Apples D: Soybean E: Whole Wheat Bread F: Tasty Cake G: Fish The resulting derived scale and the actual values are shown below: Steak Potatoes Apples Soybean W. Bread T. Cake Derived .345 .031 .030 .065 .124 .078 Actual .370 .040 .000 .070 .110 .090 (Derived scale has a consistency ratio of .028.) A 1 B 9 1 C 9 1 1 D 6 1/2 1/3 1 E 4 1/4 1/3 1/2 1 F 5 1/3 1/5 1 3 1 G 1 1/4 1/9 1/6 1/3 1/5 1

(Reciprocals)

Fish .328 .320

WEIGHT COMPARISONS
Weight Radio Typewriter Large Projector Small Eigenvector Attache Attache Case 1/3 1/4 4 0.09 2 2 8 0.40 1 1/2 4 0.18 Actual Relative Weights 0.10 0.39 0.20

Radio Typewriter Large Attache Case Projector Small Attache Case

1 5 3

1/5 1 1/2

4 1/4

1/2 1/8

2 1/4

1 1/7

7 1

0.29 0.04

0.27 0.04

DISTANCE COMPARISONS

Comparison Cairo Tokyo Chicago San London Montreal Eigen- Distance to Relative of Distances Francisco vector Philadelph Distance from ia in miles Philadelphia

Cairo Tokyo Chicago San Francisco London Montreal

1 3 1/8 1/3 1/3 1/7

1/2 1 1/9 1/3 1/3 1/9

8 9 1 6 5 1/2

3 3 1/6 1 3 1/6

3 3 1/5 1/3 1 1/6

7 9 2 6 6 1

0.263 0.397 0.033 0.116 0.164 0.027

5,729 7,449 660 2,732 3,658 400

0.278 0.361 0.032 0.132 0.177 0.019

Relative Electricity Consumption (Kilowatt Hours) of Household Appliances Annual Electric Consumption

Elec. Range

Refrig

TV

Dish Wash

Iron

Radio

Hair Dryer

Eigen-vector

Actual Relative Weights

Electric Range Refrigerator TV Dishwasher

1

2

5

8

7

9

9

.393

.392

1/2 1/5 1/8

1 1/4 1/5

4 1 1/2

5 2 1

5 5 4

7 6 9

9 8 9

.261 .131 .110

.242 .167 .120

Iron

1/7

1/5

1/5

1/4

1

5

9

.061

.047

Radio

1/9

1/7

1/6

1/9

1/5

1

5

.028

.028

Hair-dryer

1/9

1/9

1/8

1/9

1/9

1/5

1

.016

.003

Relative coin sizes
.

Dime

Quarter

5Cents

Priorities

Size in mm2 Actual relative size 283.38 254.34 452.16 346.18 0.212 0.190 0.338 0.259

Cent Dime Quarter 5Cent

1.1

2 2.1

1.5 1.6 1.6

0.182 0.171 0.382 0.263

Percentage of Individuals that use different search engines

Google

Yahoo

MSN

AOL

My Web

Priorities

Actual Percentage

Google Yahoo MSN AOL My Web

1.000 0.552 0.142 0.118 0.111

1.811 1.000 0.152 0.124 0.111

7.057 6.566 1.000 0.235 0.245

8.491 8.073 4.264 1.000 0.340

9.000 9.000 4.076 2.943 1.000

0.463 0.367 0.101 0.048 0.030

0.485 0.225 0.107 0.066 0.027

Relative Distances from Pittsburgh

Distance From Pittsburgh L.A. New Orleans

L.A.

New Orleans 3 1

St. Louis

Washington D.C. 7 6

Priorities

Actual Distance In Miles 2446 1049

Relative Values .556 .249

1 1/3

5 3

.558 .267

St. Louis Washington D.C.

1/5 1/7

1/3 1/6

1 1/4

4 1

.125 .049

610 247

.139 .056

Model Mercedez - E BMW - 5 Acura - TL Lexus - ES Audi - A6

Mercedez - E 1

BMW - 5 1 1

Acura - TL 1.6 1.5 1

Lexus - ES 1.3 1.25 1.3 1

Audi - A6 1.25 1.2 2 1 1

Priorities 0.237128 0.230349 0.151647 0.187402 0.193475

Actual Cost 52000 48000 30000 40000 42000

Relative Values 0.245283019 0.226415094 0.141509434 0.188679245 0.198113208

Nonlinearity of the Priorities

RELATIVE VISUAL BRIGHTNESS-I

C1 C1 C2 C3 C4
1 1/5 1/6 1/7

C2
5 1 1/4 1/6

C3
6 4 1 1/4

C4
7 6 4 1

RELATIVE VISUAL BRIGHTNESS -II

C1 C1 C2 C3 C4
1 1/4 1/6 1/7

C2
4 1 1/3 1/4

C3
6 3 1 1/2

C4
7 4 2 1

RELATIVE BRIGHTNESS EIGENVECTOR The Inverse Square Law of Optics I II C1 .62 .63 C2 .23 .22 C3 .10 .09 C4 .05 .06
Normalized distance 0.123 0.205 0.288 0.384 Square of normalized distance 0.015 0.042 0.083 0.148 Reciprocal of previous column 67 24 12 7 Normalized reciprocal 0.61 0.22 0.11 0.06

Distance 9 15 21 28

There are two Kinds of Fundamentally Different Numbers
The behavior and arithmetic of such numbers are different
Numbers Derived from Measurements; Metric Topology-closeness (Scale Numbers) Numbers that have the same value no matter how many other things there are Counting Measuring Absolute Scales Ratio Scale Interval Scale Need a unit except for absolute scales defined in terms of equivalence classes Numbers Derived from Comparisons; Order Topology (Dominance Numbers) The numerical values of such numbers depend on what other things a given thing is compared with. They are often referred to as relative numbers. The ratio of two absolute numbers or ratio scale numbers is absolute. So is the ratio of interval scale differences. The lesser of two elements is used as a unit in each comparison. No unique unit for the derived scale which defines an absolute scale in relative form like probabilities.

Meaning and Usefulness
Dominance Numbers are: • Abstract (dependent and Scale Numbers are: changeable) • Concrete (independent from what and how many • Perception oriented objects are involved and • “Subjective” therefore unchangeable) • Object oriented • “Objective”

Measurement in physics is concrete because its objects are tangible and independent, Dominance numbers are essential to make decisions relative to human values that are abstract and intangible. It is necessary to compare criteria to obtain their priorities. One can create dominance numbers from scale numbers but one cannot create scale numbers from dominance numbers because they are changeable and depend on the objects being compared. Creating dominance numbers from ratios of measurement is not always meaningful.

Extending the 1-9 Scale to 1- ∞
•The 1-9 AHP scale does not limit us if we know how to use clustering of similar objects in each group and use the largest element in a group as the smallest one in the next one. It serves as a pivot to connect the two. •We then compare the elements in each group on the 19 scale get the priorities, then divide by the weight of the pivot in that group and multiply by its weight from the previous group. We can then combine all the groups measurements as in the following example comparing a very small cherry tomato with a very large watermelon.

.07 Unripe Cherry Tomato Small Green Tomato

.28 Lime

.65

.08 Lime Grapefruit

.22 Honeydew

.70

.08 =1 .08 1 x .6 5 = .6 5

.22 = 2.75 .08 2.75 × .65 = 1.79

.70 = 8.75 .08 8.75x.65 = 5.69

.10 Honeydew

.30 Sugar Baby Watermelon Oblong Watermelon

.60

.10 =1 .10 1× 5.69 = 5.69

.30 =3 .10 3 × 5.69 = 17.07

.60 =6 .10 6 × 5.69 = 34.14

This means that 34.14/.07 = 487.7 unripe cherry tomatoes are equal to the oblong watermelon

Clustering & Comparison
How intensely more green is X than Y relative to its size?

Color

Honeydew

Unripe Grapefruit

Unripe Cherry Tomato

Unripe Cherry Tomato

Oblong Watermelon

Small Green Tomato

Small Green Tomato

Sugar Baby Watermelon

Large Lime

64

Antares is the 15th brightest star in the sky.It is more than 1000 light years away.

Comparing a Dog-Catcher w/ President

Comparing a Dog-Catcher w/ President

Goal Satisfaction with School

Learning

Friends

School Life

Vocational Training

College Prep.

Music Classes

School A

School B

School C

School Selection
L 1 1/4 F 4 1 SL 3 7 1 5 5 6 VT 1 3 1/5 1 1 3 CP 3 1/5 1/5 1 1 1/3 MC Weights 4 .32 1 1/6 1/3 3 1 .14 .03 .13 .24 .14

Learning Friends School Life Vocational Trng. College Prep. Music Classes

1/3 1/7 1 1/3 1/4 1/3 5 1

Comparison of Schools with Respect to the Six Characteristics
Learning A B C A B C 1 3 2 1/3 1/2 1 1/3 3 1
Priorities

Friends A B C A B C 1 1 1 1 1 1 1 1 1

Priorities

School Life A B C A B C 1 1/5 1 5 1 5 1 1/5 1

Priorities

.16 .59 .25

.33 .33 .33
Priorities

.45 .09 .46
Priorities

Vocational Trng. Priorities

A A B C 1 1/9 1/7

B 9 1 5

C 7 1/5 1 .77 .05 .17 A B C

College Prep. A B C 1 2 1 1/2 1 1/2 1 2 1

Music Classes

A .25 .50 .25 A B C 1 1/6 1/4

B 6 1 3

C 4 1/3 1 .69 .09 .22

Composition and Synthesis
Impacts of School on Criteria

.32 L A B C .16 .59 .25

.14 F .33 .33 .33

.03 SL .45 .09 .46

.13 VT .77 .05 .17

.24 CP .25 .50 .25

.14 MC .69 .09 .22

Composite Impact of Schools

.37 .38 .25

The School Example Revisited Composition & Synthesis:
Impacts of Schools on Criteria
Distributive Mode (Normalization: Dividing each entry by the total in its column)
.32 L A B C .16 .59 .25 .14 F .33 .33 .33 .03 SL .45 .09 .46 .13 VT .77 .05 .17 .24 CP .25 .50 .25 .14 MC .69 .09 .22 Composite Impact of Schools .37 .38 .25 .32 L A B C .27 1 .42

Ideal Mode (Dividing each entry by the maximum value in its column)
.14 F 1 1 1 .03 SL .98 .20 1 .13 VT 1 .07 .22 .24 CP .50 .50 .50 .14 Composite NormalMC Impact of ized Schools 1 .65 .34 .13 .32 .73 .50 .39 .27

The Distributive mode is useful when the The Ideal mode is useful in choosing a best uniqueness of an alternative affects its rank. alternative regardless of how many other The number of copies of each alternative similar alternatives there are. also affects the share each receives in allocating a resource. In planning, the scenarios considered must be comprehensive and hence their priorities depend on how many there are. This mode is essential for ranking criteria and sub-criteria, and when there is dependence.

A Complete Hierarchy to Level of Objectives
Focus:

At what level should the Dam be kept: Full or Half-Full

Decision Criteria:

Financial

Political

Env’t Protection

Social Protection

Decision Makers:

Congress

Dept. of Interior

Courts

State

Lobbies

Factors:

Clout

Legal Position

Potential Financial Loss

Irreversibility of the Env’t

Archeological Problems

Current Financial Resources

Groups Affected:

Farmers

Recreationists

Power Users

Environmentalists

Objectives:

Irrigation

Flood Control

Flat Dam

White Dam

Cheap Power

Protect Environment

Alternatives:

Half-Full Dam

Full Dam

Evaluating Employees for Raises
GOAL
Dependability (0.075) Outstanding (0.48) .48/.48 = 1 Very Good (0.28) .28/.48 = .58 Good (0.16) Education (0.200) Doctorate
(0.59) .59/.59 =1

Experience (0.048) >15 years (0.61) 6-15 years (0.25) 3-5 years (0.10) 1-2 years (0.04)

Quality (0.360) Excellent (0.64) Very Good (0.21) Good (0.11) Poor (0.04)

Attitude (0.082) Enthused (0.63) Above Avg. (0.23) Average (0.10) Negative (0.04)

Leadership (0.235) Outstanding (0.54) Above Avg. (0.23) Average (0.14) Below Avg. (0.06) Unsatisfactory (0.03)

Masters
(0.25).25/.59 =.43

Bachelor (0.11) etc. High School (0.05)

.16/.48 = .33

Below Avg. (0.05) .05/.48 = .10 Unsatisfactory (0.03) .03/.48 = .06

Final Step in Absolute Measurement
Rate each employee for dependability, education, experience, quality of work, attitude toward job, and leadership abilities.
Dependability 0.0746 Esselman, T. Peters, T. Hayat, F. Becker, L. Adams, V. Kelly, S. Joseph, M. Tobias, K. Washington, S. O’Shea, K. Williams, E. Golden, B. Outstand Outstand Outstand Outstand Good Good Blw Avg. Outstand V. Good Outstand Outstand V. Good Education 0.2004 Doctorate Masters Masters Bachelor Bachelor Bachelor Hi School Masters Masters Hi School Masters Bachelor Experience 0.0482 >15 years >15 years >15 years 6-15 years 1-2 years 3-5 years 3-5 years 3-5 years 3-5 years >15 years 1-2 years .15 years Quality 0.3604 Excellent Excellent V. Good Excellent Excellent Excellent Excellent V. Good V. Good V. Good V. Good V. Good Attitude 0.0816 Enthused Enthused Enthused Abv. Avg. Enthused Average Average Enthused Enthused Enthused Abv. Avg. Average Leadership 0.2348 Outstand Abv. Avg. Outstand Average Average Average Average Abv. Avg. Abv. Avg. Average Average Abv. Avg. Total Normalized

1.000 0.752 0.641 0.580 0.564 0.517 0.467 0.466 0.435 0.397 0.368 0.354

0.153 0.115 0.098 0.089 0.086 0.079 0.071 0.071 0.066 0.061 0.056 0.054

The total score is the sum of the weighted scores of the ratings. The money for raises is allocated according to the normalized total score. In practice different jobs need different hierarchies.

Should U.S. Sanction China? (Feb. 26, 1995)
BENEFITS
Protect rights and maintain high Incentive to make and sell products in China (0.696) Rule of Law Bring China to responsible free-trading 0.206) Help trade deficit with China (0.098)

Yes .80 No .20

Yes .60 No .40
Yes 0.729 No 0.271

Yes .50 No .50

COSTS
$ Billion Tariffs make Chinese products more expensive (0.094) Retaliation (0.280) Being locked out of big infrastructure buying: power stations, airports (0.626)

Yes .70 No .30

Yes .90 No .10
Yes 0.787 No 0.213

Yes .75 No .25

RISKS
Long Term negative competition (0.683) Effect on human rights and other issues (0.200) Harder to justify China joining WTO (0.117)

Yes .70 No .30

Yes .30 No .70
Yes 0.597 No 0.403

Yes .50 No .50

Result:

Benefits Costs x Risks

;

YES

.729 .787 x .597

= 1.55

NO

.271 .213 x .403

= 3.16

8

Benefits/Costs*Risks

7 6 5 4 3 2 1

. . . . .. .. . . . . .. ... . . . . ..... . .. . .
18 30 42 54 66 78 90

. . .. .

.

No Yes

0 6

102 114 126 138 150 162 174 186 198 210

Experiments

Whom to Marry - A Compatible Spouse
Flexibility Independence Growth Challenge Commitment Humor Intelligence

Psychological
Communication & Problem Solving Family & Children

Physical
Food Shelter

Socio-Cultural
Sociability Finance

Philosophical
World View

Aesthetic
Housekeeping

Theology

Sense of Beauty & Intelligence

Temper

Sex

Understanding

Security Affection

CASE 1:

Marry

Not Marry

Loyalty

CASE 2:

Campbell

Graham

McGuire

Faucet

Value of Yen/Dollar Exchange : Rate in 90 Days
Relative Interest Rate .423
Federal Reserve Monetary Policy .294 Size of Federal Deficit .032 Bank of Japan Monetary Policy .097

Forward Exchange Rate Biases .023
Forward Rate Premium/ Discount .007 Size of Forward Rate Differential .016

Official Exchange Market Intervention .164
Consistent Erratic

Relative Degree of Confi- Size/Direction of U.S. dence in U.S. Economy Current Account .103 Balance .252
Relative Inflation Rates .019 Relative Real Growth .008 Relative Political Stability .032 Size of Deficit or Surplus .032 Anticipated Changes

Past Behavior of Exchange Rate .035
Relevant Irrelevant

.137

.027

.221

.004

.031

Tighter .191 Steady .082 Easier .021

Contract .002 No Chng. .009 Expand .021

Tighter .007 Steady .027 Easier .063

High .002 Medium .002 Low .002

Premium .008 Discount .008

Strong .026 Mod. .100 Weak .011

Strong .009 Mod. .009 Weak .009

Higher .013 Equal .006 Lower .001

More .048 Equal .003 Lower .003

More .048 Equal .022 Less .006

Large .016 Small .016

Decr. .090 No Chng. .106 Incr. .025

High .001 Med. .001 Low .001

High .010 Med. .010 Low .010

Probable Impact of Each Fourth Level Factor 119.99 and below Sharp Decline 0.1330 119.99134.11 Moderate Decline 0.2940 134.11148.23 No Change 0.2640 148.23162.35 Moderate Increase 0.2280 162.35 and above Sharp Increase 0.0820

Expected Value is 139.90 yen/$

Best Word Processing Equipment
Focus

Benefits

Criteria

Time Saving

Filing

Quality of Document

Accuracy

Features

Training Required

Screen Capability Lanier (.42)

Service Quality Syntrex (.37)

Space Required Qyx (.21)

Printer Speed

Alternatives

Focus

Costs

Criteria

Capital

Supplies

Service

Training

Alternatives

Lanier .54

Syntrex .28

Oyx .18

Best Word Processing Equipment Cont. Benefit/Cost Preference Ratios Lanier .42 = 0.78 .54 Syntrex .37 = 1.32 .28 Qyx .21 = 1.17 .18

Best Alternative

Group Decision Making and the Geometric Mean
Suppose two people compare two apples and provide the judgments for the larger over the smaller, 4 and 3 respectively. So the judgments about the smaller relative to the larger are 1/4 and 1/3.

Arithmetic mean 4+3=7 1/7 ≠ 1/4 + 1/3 = 7/12
Geometric mean √ 4 x 3 = 3.46 1/ √ 4 x 3 = √ 1/4 x 1/3 = 1/ √ 4 x 3 = 1/3.46
That the Geometric Mean is the unique way to combine group judgments is a theorem in mathematics.

0.05 0.47

0.10

0.15

0.24

Why Is the Eigenvector Necessary
1) Consistent matrix: Aw = nw; Ak = n k −1 A. 2) Perturbed matrix: Aw = λmax w. 1 m k 3) Transitivity → lim ∑ A e / eT Ak e → w, eT = (1,...,1). By Cesaro sumability k →∞ m k =1 this converges to the same limit as Ak e / eT Ak e. 4) Necessity : Priority must be invariant with respect to whatever process of synthesis one chooses. We start with an initial priority vector (1,...,1) and then derive a first estimate of priorities from it. We then use this vector it to weight the alternatives or weight squares of differences and derive a new priority vector, and so on. For uniqueness we must have A o x = cx, where o indicates the composition principle used and c indicates proportionality of the new vector cx and the old vector x. For additive composition we have Ax = cx. More generally, Ak x = c k x and because initially x = e, Ak e = c k e → w, the principal right eigenvector of A. Thus it is necessary to use the eigenvector to derive a priority vector.

A1 ... An A1w w ... w wn w  w 1 1 1 1 1  M ... M   M  = n  M =nw Aw= M      Anwn w ... wn wn wn wn  1    

i ijji a

Let A1, A2,…, An, be a set of stimuli. The quantified judgments on pairs of stimuli Ai, Aj, are represented by an n-by-n matrix A = (aij), ij = 1, 2, . . ., n. The entries aij are defined by the following entry rules. If aij = a, then aji = 1 /a, a 0. If Ai is judged to be of equal relative intensity to Aj then aij = 1, aji = 1, in particular, aii = 1 for all i.

a12  1 1/ a 1 12 A=   M M  1/ a1n 1/ a2n 

... a1n   ... a2n  M M  ... 1  

How to go from to and then to

Aw=nw Aw=cw Aw=λmaxw

Clearly in the first formula n is a simple eigenvalue and all other eigenvalues are equal to zero. A forcing perurbation of eigenvalues theorem: If λ is a simple eigenvalue of A, then for small ε > 0, there is an eigenvalue λ(ε) of A(ε) with power series expansion in ε:

λ(ε)= λ+ ε λ(1)+ ε2 λ(2)+…
and corresponding right and left eigenvectors w (ε) and v (ε) such that w(ε)= w+ ε w(1)+ ε2 w(2)+… v(ε)= v+ ε v(1)+ ε2 v(2)+…

∑a
j=1
n

n

ij

w j = λ max wi
1

∑w =
i i=1

1 2 1 0 λ 0  A=  , I = 0 1  , λ I =  0 λ  3 4     2  1 − λ ( A − λI ) =  3 4 − λ   A − λI = (1 − λ)(4 − λ) − 6 = λ2 − 5λ − 2 = 0

5 + 33 2 5 − 33 λ2 = 2 λ1 =

max ∑aij ≥∑aij
j =1 n j =1 n

n

n

wj wi wj wi

= λmax for max wi = λmax for min wi
n n

min ∑aij ≤∑aij
j =1 j =1

Thus for a row stochastic matrix we have 1=min ∑aij ≤ λmax ≤ max ∑aij = 1, thus λmax =1.
j =1 j =1

Sensitivity of the Eigenvector
∆ w1=


j= 2

n

( v Tj ∆ A w

1

/( λ

1

- λ

j

) v Tj w

j

)w

j

The eigenvector w1 is insensitive to perturbation in A, if 1) the number of terms is small (i.e. n is small), 2) if the principal eigenvalue λ1 is separated from the other eigenvalues , here assumed to be distinct (otherwise a slightly more complicated argument can also be made and is given below) and, 3) if none of the products vjT wj of left and right eigenvectors is small and if one of them is small, they are all small. Howerver, v1T w1, the product of the normalized left and right principal eigenvectors of a consistent matrix is equal to n which as an integer is never very small. If n is relatively small and the elements being compared are homogeneous, none of the components of w1 is arbitrarily small and correspondingly, none of the components of v1T is arbitrarily small. Their product cannot be arbitrarily small, and thus w is insensitive to small perturbations of the consistent matrix A. The conclusion is that n must be small, and one must compare homogeneous elements. When the eigenvalues have greater multiplicity than one, the corresponding left and right eigenvectors will not be unique. In that case the cosine of the angle between them which is given by corresponds to a particular choice of and . Even when and correspond to a simple they are arbitrary to within a multiplicative complex constant of unit modulus, but in that case | viT wi| is fully determined. Because both vectors are normalized, we always have | viT wi | <1.

Fundamentals of the AHP/ANP •How to structure complexity as a hierarchy or as a network; •Why make comparisons to derive priorities; •Why reciprocals and why homogeneous groups of elements; •Why the fundamental scale 1-9, what does it mean to assign a number for a judgment; •Why allow inconsistency; •What is the minimum number of judgments needed and why use redundant judgments; •Why the principal right eigenvector;

•Why absolute numbers and absolute scales; •Why weight and add for synthesis; •Why the distributive and ideal modes; •Why the supermatrix and what does raising it to powers do; •Why stochastic supermatrix; •Why weight the components; •Why BOCR – why add benefits and opportunities and subtract costs and risks ; •Why the ideal mode; •How to allocate resources –the need for ratio scales;

Some Answers
(Only to be a little helpful)
• One structures a hierarchy from a goal download to criteria, subcriteria and goals, involving actors
and stakeholders and terminating in alternatives at the bottom. The ideas to go gradually from the general to the particular. In a network, elements are put in clusters or components with their connections indicating influence. •Comparisons are more scientific in deriving scales because they use a unit and estimate multiples of that unit rather than simply assigning numbers by guessing. •Reciprocals are needed because if one element is five times more important than another then the other is a forteori one fifth as important as the first. One deals with homogeneous clusters to make the comparisons possible, closer and more accurate. •The scale 1-9 helps us quantify our feelings and judgments in comparing elements. •Human judgment expressed in the form of paired comparisons is naturally inconsistent. A modicum of inconsistency enables us to improve our understanding by focusing on the most inconsistent judgments. • The minimum number of judgments needed to connect n elements is n-1. Redundant judgments improve the validity of the derived priority vector. •Ratios and ratio scales give us information on both the rank order of the elements and on their relative values. It also makes possible proportionate resource allocation. •Weighting and adding follows from simple operations we do all the time and is no different for priorities. Suppose the goal has two components of values 0.6 and 0.4, and assume that one has a 0.2 share in the first component and a 0.7 share in the second. The total share with respect to the goal is 0.6 x 0.2 + 0.4 x 0.7 = 0.4. •The supermatrix is the framework for organizing the priorities derived from paired comparisons. Raising it to powers gives the overall influence of each element on all the other elements.

ASSIGNING NUMBERS vs. PAIRED COMPARISONS
• A number assigned directly to an object is at best an ordinal and cannot be justified. • When we compare two objects or ideas we use the smaller as a unit and estimate the larger as a multiple of that unit.

• If the objects are homogeneous and if we have knowledge and experience, paired comparisons actually derive measurements that are likely to be close and that indicate magnitude on an absolute scale.

WHY IS AHP EASY TO USE?
• It does not take for granted the measurements on scales, but asks that scale values be interpreted according to the objectives of the problem. • It relies on elaborate hierarchic structures to represent decision problems and is able to handle problems of risk, conflict, and prediction.

• It can be used to make direct resource allocation, benefit/cost analysis, resolve conflicts, design and optimize systems. • It is an approach that describes how good decisions are made rather than prescribes how they should be made.

WHY THE AHP IS POWERFUL IN CORPORATE PLANNING
1. Breaks down criteria into manageable components. 2. Leads a group into making a specific decision for consensus or tradeoff. 3. Provides opportunity to examine disagreements and stimulate discussion and opinion.

4. Offers opportunity to change criteria, modify judgments. 5. Forces one to face the entire problem at once. 6. Offers an actual measurement system. It enables one to estimate relative magnitudes and derive ratio scale priorities accurately.

7. It organizes, prioritizes and synthesizes complexity within a rational framework. 8. Interprets experience in a relevant way without reliance on a black box technique like a utility function. 9. Makes it possible to deal with conflicts in perception and in judgment.

Table 1 Comparison of Group Decision Making Methods
Method Group Maintenance Leadership Effectiveness Learning Problem Abstraction Scope Development of Alternatives Low Low Medium Very High Very High NA High High Medium Low Low Low High Structure Breadth Depth Analysis Faithfulness of Judgments NA NA NA NA NA Low Low Low Medium Medium Very High Very High Medium Breadth and Depth of Analysis (What if) NA NA NA NA NA Low Low Low Medium Medium Medium Medium High

Structuring Analogy, Association Boundary Examination Brainstorming/Brainwriting Morphological Connection Why-What's Stopping Ordering and Ranking Voting Nominal Group Technique Delphi Disjointed Incrementalism Matrix Evaluation Goal Programming Conjoint Analysis Outranking

Low Medium Low Low Medium Low Medium Medium Medium Medium Low Low Medium

Medium Medium Low Medium Medium Low Medium Medium High Medium Low Low High

Medium High Low High High NA Medium Medium Medium Medium Medium Medium Medium

NA NA NA NA High Low Low Low High High High Low High

NA NA NA NA High Low Low Low Low Low Low Low Low

Structuring and Measuring Baysian Analysis MAUT/MAVT AHP

Medium Medium High

High High Very High

Medium Medium Medium

Low High Very High

Low High High

Low Low High

Very High High Very High

Medium High Very High

NA = Not Applicable

Table1 (cont'd)
Method Cardinal Separation of Alternatives Structuring Analogy/Association Boundary Examination Brainstorming/Brainwriting Morphological Connection Why-What's Stopping Ordering and Ranking Voting Nominal Group Technique Delphi Disjointed Incrementalism Matrix Evaluation Goal Programming Conjoint Analysis Outranking NA NA NA NA NA Low NA NA NA NA High High High Fairness Prioritizing Group Members Consideration of Other Actors & Stakeholders NA NA NA NA NA NA NA NA Medium Medium Low NA Low Scientific and Mathematical Generality NA NA NA NA NA Medium Medium Medium Low Low Medium Medium Medium Applicability, Validity, and Truthfulness Applicability to Intangibles Psychophysical Applicability Applicability to Conflict Resolution NA NA NA NA NA NA NA NA NA NA NA NA NA Validity of the Outcome (Prediction)

NA NA NA NA NA Low NA NA NA NA NA NA High

NA NA NA NA NA NA NA NA Low Low Medium Medium Medium

NA NA NA NA NA NA NA NA Low Low NA NA Medium

NA NA NA NA NA Low Low Low Medium Medium Low Low Medium

Structuring and Measuring Baysian Analysis MAUT/MAVT AHP

High High High

NA High Very High

Low Medium High

High High High

Medium Medium Very High

Low Medium Very High

NA Medium High

Medium Medium High

NA = Not Applicable

03/27/2006 09:58 PM Dear Prof. Saaty: Recently, I am thinking my future research fields all along. It is a really difficult decision. I want to devote myself to MCDM. I also know that Herbert A. Simon got the Nobel prize in 1978 for his contribution to organizational decision making, and Nash for his contribution to game theory and its applications. I wonder if there is any possibility for the research on MCDM to make the same great contribution. regards, Sun Yonghong Sun Yonghong <50008602@student.cityu.edu.hk> -----Original Message----From: saaty@katz.pitt.edu [mailto:saaty@katz.pitt.edu] Sent: Tuesday, March 07, 2006 8:24 PM To: Sun Yonghong Subject: Re: Dear Mr. Sun, I assume you are just learning the subject because I think these are old papers that are not written electronically. Would it be ok to send you other papers on the subject or should I try to find them and scan them? I have generalized the AHP to the Analytic Network Process with dependence and feedback (ANP) you may want something on it too. I teach a graduate course on the ANP starting tomorrow. Kind regards, Tom Saaty

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