The Analytical Hierarchy Process

Goal programming is a method that provides us with a mathematical “quantity” for the decision variables
that best achieves a set of goals. It answers the question “How much?” The analytical hierarchy process
(AHP), developed by Thomas Saaty, is a method for ranking decision alternatives and selecting the best
one when the decision maker has multiple objectives, or criteria, on which to base the decision. Thus, it
answers the question “Which one?” For example, someone buying a house might have several houses for
sale from which to choose, the buyer might consider the cost, proximity of schools, trees, neighborhood,
and public transportation when comparing several houses. AHP is aprocess for developing a numeric
score to rank each decision alternative, based on how well each alternative meets the decision maker’s
criteria.
We will demonstrate AHP by using an example. Southcorp Development builds and operates shopping
malls around the country. The company has identified three potential sites for its latest project, near
Atlanta, Birmingham, and Charlotte. The company has identified four primary criteria on which it will
compare the sites—(1) the customer market base (including overall market size and population at
different Pairwise Comparisons
In AHP the decision maker determines how well each alternative “scores” on a criterion by using
pairwise comparisons. In a pairwise comparison, the decision maker compares two alternatives (i.e., a
pair) according to one criterion and indicates a preference. These comparisons are made by using a
preference scale, which assigns numeric values to different levels of preference.
The standard preference scale used for AHP is shown in Table 9.1. This scale has been determined by
experienced researchers in AHP to be a reasonable basis for comparing two items or alternatives. Each
rating on the scale is based on a comparison of two items. For example, if the Atlanta site is “moderately
preferred” to the Birmingham site, then a value of 3 is assigned to this particular comparison. The rating
of 3 is a measure of the decision maker’s preference for one of the alternatives over the other.
If Southcorp compares Atlanta to Birmingham and moderately prefers Atlanta, resulting in a comparison
value of 3 for the customer market criterion, it is not necessary for Southcorp to compare Birmingham to
Atlanta to determine a separate preference value for this
Developing Preferences Within Criteria
The next step in AHP is to prioritize the decision alternatives within each criterion. For our site selection
example, this means that we want to determine which site is the most preferred, the second most
preferred, and the third most preferred for each of the four criteria. This step in AHP is referred to as
synthesization. The mathematical procedure for synthesization is very complex and beyond the scope of
this text. Instead, we will use an approximation method for synthesization