MULTICRITE DECISION MAKING USING FUZZY LOGIC
Heinrich J. Rommelfanger
J.W. Goethe-University Frankfurt am Main, Institute of Statistics and Mathematics
Mertonstr. 17-23, D-60054 Frankfurt an Main, Germany
Rommelfanger@wiwi.uni-fiankfiu-t.de
Abstract
In this paper a new method for solving multicriteria deci-
sion problems is represented. Similar to the Analytic
Hierarchy Process or the Utili@ Value Analysis the goals
and subgoals are ordered in a hierarchical structure. The
goals on the lowest level are valuated by means of lin-
guistic variables based on cardinal or ordinal scales
which are proposed by experts. The evaluations of the
subgoals are aggregated by using expert rules and fuzzy
inference.
1. Introduction
Decision making is one of the most central and perva-
sive human activities. Everybody makes decisions all the
time. Unfortunately the majority of models in literature of
decision theory or operations research have concentrated
on single criterion decision making. But in our complex
world, we need to set priorities on the solutions according
to their effectiveness by considering their benefits and
costs, risks and opportunities and the resources they need.
Le., in practice we have to consider several objectives
simultaneously.
In literature, a lot of approaches are proposed for solv-
ing multicriteria decision problems. Well known methods
are the Utility Theory based on the use of lottery compari-
sons, Bayesian Theory based on probabilities, Outranking
Methods based on ordinal comparisons of concordance
and discordance, the Analytic Hierarchy Process (AHP)
based on hierarchical structures, paired comparisons and
priority vectors and Goal Programming. All these proce-
dures have the handicap that they map the ideas of the
decision maker about the real problem in a crisp mathe-
matical model, neglecting inaccuracies about the data and
the structure. Particularly the fact that some of the criteria
can only be measured on an ordinal scale is usually disre-
garded. Therefore, it often happens that a rational solution
of the mathematical model is calculated but not necessarily
of the real problem.
0-78034453-7/98 $10.00 0 1998 IEEE
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To underpin this statement we refer to the following
faults:
- Utility are a elegant theoretical tool for mapping a
multidimensional goal vector in a one-dimensional real
number. But practice do not accept this trick; because
neither the proposal to determine utilities by using lot-
teries nor the method to reduce the dimensions step by
step by means of the transformation principle can con-
vince.
- The Utility Value Analysis reduce the problem of util-
ity measurement by assigning a utility value to each
goal separately. Moreover the scaling problem is also
reduced, as the non-metric scaled goals are divided in
subaspects which can be measured on a metric scale.
For getting a accumulated result all utility values
should be aggregated step by step using weighted alge-
braic sum. The open question is how to get the correct
weights.
- The Analytic Hierarchy Process completely ignores
the scaling problem. Moreover, the procedure for
deriving priorities using paired comparisons is not
convincing. I have my doubts about that artificial
method using a lot of mathematical calculation as
summing up ratios and calculating eigenvectors which
are not well-founded. Also further developments as
Analytic Network Process or Fuzzy Analytic Hierarchy
Process do not eliminate these objections.
- Only Outranking Methods based on satisfying solu-
tions in the sense of Simon are convincing procedures
for selecting a best solution. But often we have the
problem that all alternatives should be ranked.
In this paper a new method for solving multicriteria
decision problems is represented. Similar to the Analytic
Hierarchy Process or the Utility Value Analysis the goals
and subgoals are ordered in a hierarchical structure. At
first, the goals on the lowest level are valuated by linguis-
tic variables based on cardinal or ordinal scales. The lin-
guistic variables are modeled by experts using suitable
data banks. Then the evaluations of the subgoals are
aggregated by using expert rules and fuzzy inference. The
results are hzzy evaluations. If required the fuzzy results
may be compressed using defuzzification methods.
2. Hierarchical structure Market Market Rate of
Sales
Empirical studies reveal that persons are not able to Share Growth Innovation
compare consistently more than three criteria. Therefore it P P P P-
is useful to work with hierarchical goal systems where at P P m P-
most three or four subaspects are aggregated at each step. P P g P
Moreover, complex and not directly measurable criteria, P m P P
as for example the credit solvency of a business firm,may P m m P
often be explained more transparent and more intelligible P m g P+
by a hierarchical system of subcriteria. P g P P+
P g m m-
For getting a overall ranking of an alternative, at first m
P g g
the aspects on the bottom level have to be evaluated. Then m P P P
those evaluations of the subattributes need to be aggre- m m m-
P
gated step by step until the top level of the hierarchical m m-
P g
concept is reached. m m P P+
Usually this aggregation process is accomplished by m m m m
means of aggregation operators depending on parameters m m g m
or weights which ask for further specification by the deci- m g P P+
sion maker. m 0 m m
An disadvantage of these operators is that they portray m g g g-
the complex conjunction mechanism of the human mind g P P P
only incompletely. In literature and practice there exist a g P m P+
lot of examples, that the weights within an objective sys- g P g m-
tem depend not only on the objectives but often change g m P m-
with the obtained values. E.g., a rule table for the evalua- g m m m
tion of adjustments of salability is presented in [3]. It g m g m+
seems impossible or at least very difficult to describe this
0
g P g-
aggregation pattern by means of operators. g g m g
LL L g+
Table 1: Evaluation of Sales
3. Aggregation of subcriteria by expert rules
In the artificial intelligence literature we can find many Market Growth (MG) Grade
models in which the human aggregation process is
described by means of rules formulated by experts. The MG < - 5 YO 6
Table 1 presents a rule map established by an expert team -5 % IMG < 0 % 5 (big risk)
of the Commerzbank AG Frankfurt am Main, see [ 11. 0 % 5 MG < 5 yo 4 medium (m)
Using a rule map for aggregating subaspects to take the 5 yo I MG < 7 % 3 (medium risk)
fact into account that the weights do not depend merely on
the different criteria but of the evaluation of these criteria 7?'oIMG<10% 2
too. Therefore, a rule based aggregation is a very flexible 1 (small risk)
10%5MG
tool for expressing an individual imagination. In the rule
Table 2: Evaluation of Market growth
matrix in Table 1, the evaluation of determinants is not
described by degrees of the interval [0, 11 but by the lin- To improve this situation we could try to enlarge the
guistic terms ,,poor", ,,medium" and ,,good". For every number of valuations for each criterion. This, however
possible situation on the lower hierarchy level an aggrega- would result in an explosive increase of the number of
tion rule is defined. In this study only three values per rules as for m aspects with r possible valuations there exist
criterion were distinguished, yet additional ratings r m rules. In the case of the valuation of ,,Sales" in
(- and/or +) were allowed for the aggregation results. Table 1, we have now 33 = 27 rules. An increase in the
Objections against those rules can be raised due to the number of valuations to 5 would result in
fact that the rules are very inaccurate; the terms ,,good", 53 =I25 rules.
,,medium", ,,poor" allow a comparably large interpretation Therefore it is necessary to restrain the number of
spectrum, see e.g. Table 2. Moreover the strong distinc- valuations for each aspect. Moreover if the rule map gets
tions between the three classes give the impression of an too large the expert team will not be able to guarantee a
arbitrary classification. conscious distinction of each situation.

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4. Description of expert rules by fuzzy sets
As demonstrated in the example above different values
of the same interval portray a linguistic term not corre-
spondingly. This is a result of the fact that intervals only
allow Yes/No-statements. Therefore we propose to model
the linguistic terms by fuzzy sets; this theory makes it
possible to describe the different membership degrees
according to the categories of ,,poor", ,,medium" or
,,good" credit solvency as precise as the credit expert can
express it. These membership functions must be specified
as carefully as possible, because they will decisively influ-
ence the valuation process. Nevertheless we will never
obtain membership functions which are accurate in every
detail, because a lot of data about similar firms and knowl-
edge of the trade must be collected by the expert team.
Therefore the form of membership functions in expert
systems will be very simple and the same design will be
used repeatedly. In practice it is sufficient to work with
fuzzy numbers or fuzzy intervals of the LR-type.
Whereas fuzzy control applications usually employ
very simple triangular or trapezoid fuzzy sets, we propose
to use reference functions of the s-type, which take pattem
to normal probability distributions in non-technical appli-
cations. In the Figures 2, 3 , 4, 5 the reference function
exp(-u2) is used. To specify the form of a membership
function for small membership degrees is particularly
difficult. To avoid errors we propose to neglect all
membership degrees smaller than a minimum level E, in
the following Figures this minimum level is fixed at E =
0.05.
Membership function
.
3 4
1
7 12 I6 10 24'
Figure 1: Valuation of Market Share
Membership function
poor * . medium . :.
-\I- .' f-
; \
Figure 3: Valuation o f Market Growth
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i good
_. , ~,~
,
13 25 i299 35
Figure 4: Valuation of Rate o f Innovation
-3 -2 -1 0 1 2 3 X
Figure 5: Valuation of Sales
Presenting hzzy sets as categories of valuation pro-
vides the opportunity to precisely inform users of expert
systems about their valuation basis. Moreover by com-
paring data of different branches of business this pro-
ceeding allows to resort to knowledge already stored in
data bases.
A way for a practical transformation has been analyzed
in a pilot study at the Institute of Statistics and Mathemat-
ics of the University of Frankfurt am Main. The intention
was to design membership functions in the course of an
expert system for supporting the evaluation of the financial
and operating position of business firms as part of the
annual audit. In this case, three different types of member-
ship functions were constructed by using suitable data
banks and the knowledge of experts.
The limitation to a standardized procedure with three
types implies the advantage that the data of a f m ' s data
bank can be extensively used. By that fuzzy membership
'% functions can be defined for any reference number and any
branch of business with little effort - as long as the neces-
sary information is available.
good 5. Rule based aggregation
When modeling the linguistic evaluation terms by fuzzy
sets, the aggregation rules are only applied to those cases,
in which the evaluations produce a membership degree 1
for all subaspects. Then the corresponding rule of the rule
map is applied and leads to a distinct evaluation of the
upper-aspect with the membership degree 1, too. There-
fore the use of fuzzy sets helps users to understand the
basic principles of the expert knowledge more easily. This
,,understanding" is an essential factor for the acceptance of
an expert system and related to that for its successful reali-
zation.
362
 For all the other cases, where at least one evaluation has
a membership degree smaller than 1, no special rules have
been stated by the experts. We assume that the given rules
can be extended to situations in the vicinity. The rules are
softened with the consequence that now many rules can be
used simultaneously in a weakened manner.
For a real situation we denote the degree of fulfillment
with the descriptions of state in the rule maps by DOF.
According to the proceeding in fuzzy control, DOF is
defined as the minimum of the membership degrees at-
tached to the ,,inputs" of this rule. Having examined vari-
ous operators regarding their ability to describe the human
conjunction behavior in specific cases, we came to the
conclusion that the minimum operator should be used.
Besides others the minimum operator has the advantage
that only few rules with positive DOFs exist, whereas by
using compensatory operators almost all rules will show
positive DOFs and we therefore have to expect inter-
mediate evaluation.
For example, a firm D with the characteristics
(Market Share ,Market Growth, Rate of Innovation)
= (4 % , 5 % , 2 9 %)
can be described by means of vectors containing member-
ship degrees:
(pg!r(4%)3 p:2dium(4%), pgood(4%)
MS
= (0,62,0,22,0) and
= (0,0,47,0,32) .
This ,,fuzzification" of the crisp input values produces a
connection between the observed values and the linguistic
valuations in the rule base.
In accordance with the Table 1, we get for the firm D the
following four positive DOFs 2 E:
D°FRule 5
= in ( ~ k $ r ( 4 %,) 5 ~g-ji~m(29%))
= Min (0,62 , 1 ,0,47) = 0,47 poor
D°FRule 6
= Min (0,22 , 1 ,0,32) = 0,22 medium
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Now all rules with positive DOF contribute to the
valuation of Sales Potential in proportion to their DOFs.
When ,,turning down" the evaluations corresponding to
the individual rules we recommend the use of the Max-
Prod-inference which means that the membership values
are fixed in proportion to the corresponding DOF, see
Figure 6. We are convinced that the Max-Prod-inferenceis
more adequate than the Max-Min-inference which is often
used in Fuzzy Control applications, because the elimina-
tion of membership values which go above the DOFs
implies that rules with medium DOF get more influence.
goor medium minus medium
A
0.47
-3
.- ":_.::\-
-x;x:Ko322 -2 -1 0 1 -,
Fig. 6. Valuation of sales using Max-Prod-Inference
In this context we want to remark that there is an essen-
tial difference between fuzzy control applications and non-
technical evaluation and decision problems. Usually tech-
nical control processes are rapidly repeated. Therefore it is
sufficient when an approximately correct action is carried
out, because the correction will follow immediately. On
the contrary decision support systems require a definite
decision for every section which evidently has to be cor-
rect. As a consequence the procedure in decision support
systems has to be handled more carefully than in fuzzy
control. Not only the linguistic evaluation terms have to be
defined more carefully but also the calculation of the
DOFs and the influence of the DOFs on the final result
require an exact empirical examination.
In fuzzy control the total result is calculated by apply-
ing the Maximum-operator for aggregating the evaluations
of the rules with positive DOF. But in decision support
systems corrections should be considered. In our example
the valuation ,,medium" for the Sales can be found twice.
On the one hand we do not consider it to be right that the
rating ,,medium" only counts with a DOF
Max(0,47, 032) = 0,47 which means that the rule with
the second best positive DOF is completely neglected. On
the other hand it seems absurd to add the DOFs if two or
more rules turn up with the same ,,output", because it
would then be possible to get DOF-values greater then 1.
We propose to adopt a middle course and suggest the use
of the algebraic sum. By doing so we get - in the example
above - for the valuation ,,medium" the total DOF
0,47 + 0,32 - 0,47 x 0,32 = 0,64 which presents a more
balanced valuation.
Then the sales are vaguely evaluated by means of the
membership function shown in Figure 7.

-3 -2 -I 0 I
Figure 7: Valuation of Sales for the firm D
As expected we get a fuzzy evaluation. If it is intended
to ,,compress" the data to a unique valuation, the well
known defuzzification procedures can be used; the best-
known are the center of gravity method and the center of
area method. But using these defuzzification procedures a
metric scale is necessary. On the other hand , ordinal
scales are sufficient in the whole fuzzy inference proce-
dure.
But in hierarchical systems defuzzifying is not neces-
sary, because it is better to use directly the fuzzy valua-
tions as inputs for the next aggregation step, where the
corresponding DOFs are interpreted as membership val-
ues. For evaluating the ,,Enterprise Performance" on the
higher level of the hierarchy the firm D get the ,,fuzzified"
valuation of Sales (S):
@s,- (D), P;(D)Psm-(D)> P i (D), PLsm+(D)>P i ( D ) , PS,+(D))
= (0, 0,22, 0,22, 0,64, 0 , 0, 0).
Here, we recognize the problem, mentioned in sector 3,
that we will get problems by using too many valuation
grades. Only on the top level of the hierarchy there is no
3 64
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trouble if we use more than three evaluation classes. As
the sum of the membership values can differ fiom 1, it is
recommended to normalize the membership degrees. In
the meanwhile their exist a practical procedure for reduc-
ing the number of classes if output results are used as
inputs in the next aggregation step.
6. Final remarks and future outlook.
The application of linguistic variables and the employ-
ment of fuzzy conjunction methods offer an appropriate
method to model the human decision process. By doing so
we have no problem with ordinal scaled data and the
aggregation procedure is no longer depend on constant
weights. Moreover, the knowledge of experts and the
information in data basis can be used without any prob-
lems. As proposed in [3] it is possible to use vague input
data too.
References
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Bonitatsrisiken im Firmenkundengeschaft. In: Luthje, B
(Ed.): Risikomanagement in Banken - Konzeptionen und
Steuerungssysteme. Verband offentlicher Banken, Bonn
(Berichte und Analysen Bd. 13) 1991
2. Rommelfanger, H.:Entscheiden bei Unsch&e.- Fuzzy Deci-
sion Support-Systeme. Springer-Verlag Berlin Heidelberg
1983. second edition 1994
3. Rommelfanger, H.: Fuzzy Logic-Based Processing of Expert
Rules Used for Checking the Credit Solvency of Small Busi-
ness Firms or for Supporting Analytic Procedures of
Auditors. in Ribeiro R.R.; Yager R.R.; Zimmermann H.J.;
Kacprzyk J. (Eds.): Studies in Fuzziness and soft computing.
Physica-Verlag, Heidelberg 1998