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Introduction to MCDM Techniques : AHP as Example

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DOI: 10.13140/RG.2.2.15536.30724

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 Introduction to MCDM
Techniques : AHP as Example

Lamrani Youssef
Introduction

In our life, We make many decisions, We decide:

- which school to take?
- which place to live?
- which clothes to use?
- which food to eat?
- which persons to be our best friends
- which car to buy? and so on
Introduction

• Decision-making in such situations requires reducing uncertainty and

doubt about alternatives (solutions) to allow a reasonable choice to be
made.

• Decision-making is supported by analyses, models, and computer-

aided tools such as MCDM techniques .
Multi-criteria-decision making (MCDM)

 The MCDM has to do with making decisions involving more than

one criterion through a scientific Approach.

 MCDM is a modeling and methodological tool for dealing with

complex engineering problems.
 Multi-criteria-decision making (MCDM)
A MADM problem can be defined as:
𝑪𝟏 … 𝑪𝒏
𝑨𝟏 𝒇𝟏𝟏 … 𝒇𝟏𝒏
. . .
. . .
. . .
𝑨𝒎 𝒇𝒎𝟏 … 𝒇𝒎𝒏

𝑊 = 𝑊1 , … , 𝑊𝑛
- 𝐴1 , … . , 𝐴𝑚 are the possible alternatives
- 𝐶1 , … . , 𝐶𝑛 are criteria,
- 𝑓𝑖𝑗 is the rating of the alternative 𝐴𝑖 with respect to the criterion 𝐴𝑗 .
- 𝑊 is the vector of weights, where 𝑤𝑗 denotes the weight of the criterion 𝐶𝑗 .
Multi-criteria-decision making (MCDM)

The goal of the MADM is to choose the best set of

alternatives ( solutions) according to the defined
criteria.
Multi-criteria-decision making (MCDM)
Goal Criterial (factors) Alternatives
Decide best school •Distance School 1
• Reputation School 2
• Cost …
• Teacher kindliness School p
Determine thesis topic • Fast to finish, Topic 1
• Research Cost , Topic 2
• Level of Attractiveness, …
Topic p
Buy car • Cost Honda,
• Comfort, Ford,
• Safety Nissan
etc.

Table: Examples of MCDM problems

General Steps of a Multi-Criteria Decision
Making Process

A MADM problem consists of three phases:

1) Defining the decision context, the alternatives to be prioritized

and the decision criteria.
2) Assigning weights to all criteria
3) Ranking alternatives
 Example of Multi-Criteria Decision Making
Tools

AHP: Analytical Hierarchy Process

ANP: Analytical Network Process
TOPSIS: Technique for Order Preference by Similarity to an Ideal Solution
VIKOR or Compromise ranking method
ELECTRE: Elimination Et Choix Traduisant la Realité
PROMETHEE: Preference Ranking Organization Methods for Enrichment Evaluation
Analytic Hierarchy Process (AHP)
 The AHP(Saaty,1980) is one of the well known Multi Criteria
decision making method.

 The AHP is based principally on pairwise imprison matrix and

consistency test.
AHP : Example of buying a new car

 Our goal is to purchase a new car.

 Our purchase is based on different criteria such as cost, comfort, and safety
 Let us assume that we have two cars: Car 1 and Car 2.
1.Developing a hierarchy for the decision
- The first step in an AHP analysis is to build a hierarchy for the decision.
- The AHP structures the problem as a hierarchy.

Figure: Decision hierarchy for buying a car

2.Deriving Weights for the Criteria
Not all the criteria will have the same importance:

 A student may give more importance to the cost factor rather than to comfort and
safety
 A parent may give more importance to the safety factor rather than to the others.
2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :

We first are required to derive by pairwise comparisons the relative priority of each criterion
with respect to each of the others using a numerical scale developed by Saaty

Table: Saaty’s pairwise comparison scale

2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :
To perform the pairwise comparison you need to create a comparison matrix of the
criteria involved in the decision, as shown in Table 2

Table 2: Pairwise comparison matrix of criteria for buying a car

How to fill this matrix?

2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :
 The diagonal elements of the matrix are always 1; the importance of an criterion compared to itself
is always 1.
 If we consider that the ratio of the importance of cost versus the importance of comfort is seven
(cost/comfort = 7).
 The importance of comfort relative to the importance of cost will yield the reciprocal of this value
(comfort/cost = 1/7), so we only need to fill up the upper triangular matrix,

Table 2: Pairwise comparison matrix of criteria for buying a car

 2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :

 If we consider that cost is moderately more important than safety (cost/safety = 3)

 Finally, if we feel that safety is moderately more important than comfort (comfort-safety =1/3)
 Once all these judgments are entered in the pairwise comparison matrix, we obtain the results
shown in Table 3

Table 3: Pairwise comparison matrix of criteria for buying a car

2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :
To fill the lower triangular matrix, we use the reciprocal values of the upper diagonal. If 𝑎𝑖𝑗
is the element of row 𝑖 column 𝑗 of the matrix, then the lower diagonal is filled using this
formula:
1
𝑎𝑗𝑖 =
𝑎𝑖𝑗
Thus now we have complete comparison matrix:

Table 3: Pairwise comparison matrix of criteria for buying a car

2.Deriving Weights for the Criteria
Pair‐wise Comparison matrix :

 How to use the pair-wise comparison matrix?

 To determine the weight of each criterion, the eigenvectors and eigenvalues are to be
calculated,
 The method of calculating the weights is as follows:

𝐴𝑊 = 𝜆𝑚𝑎𝑥 𝑊,
Where 𝐴 represents the pair-wise comparison matrix and 𝜆𝑚𝑎𝑥 represents the largest
eigenvalue of A and W is the normalized eigenvector corresponding to 𝜆𝑚𝑎𝑥
2.Deriving Weights for the Criteria
Computing EigenValue and Eigenvector: Approximation Method

Suppose we have 3 by 3 reciprocal matrix from paired comparison:

1) We sum each column of the reciprocal matrix to get

2.Deriving Weights for the Criteria
Computing EigenValue and Eigenvector?
2)we divide each element of the matrix with the sum of its column, we have normalized
relative weight. The sum of each column is 1.

3)The normalized principal Eigen vector can be obtained by averaging across the rows

For the cost row: 1/3( 0.677 + 0.636 + 0.692) = 0.669.

2.Deriving Weights for the Criteria
Consistency test
• To check the consistency of our answer, we need to calculate :
• The Principal Eigen value (𝜆𝑚𝑎𝑥 )
• The consistency index (CI)
• The consistency ratio (CR)
2.Deriving Weights for the Criteria
Consistency test

The Principal Eigen value is obtained from the summation of products between
each element of Eigen vector and the sum of columns of the reciprocal matrix.

𝜆𝑚𝑎𝑥 = 1,476 0,669 + 11 0,088 + 4,333 0,243

= 3,007
2.Deriving Weights for the Criteria
Consistency test
The consistency index (CI) as follows:

The consistency ratio, defined as:

where n is the number of compared elements (in our example n = 3).

RI is the consistency index of a randomly generated comparison

matrix and is available to the public in tables

Table: Consistency indices for a randomly generated matrix

2.Deriving Weights for the Criteria
Consistency test

For our case

It can be seen that for n = 3, RI = 0.58.

Therefore,

Since this value of 0.006 < 0.10, we can assume that our judgments matrix is
reasonably consistent so we may continue the process of decision-making using
AHP
2.Deriving Weights for the Criteria
3.Deriving Local Priorities (Preferences) for the
Alternatives
 Deriving the relative priorities (preferences) of the alternatives with respect to
each criterion(cost, comfort, and safety) .
 Since these priorities are valid only with respect to each specific criterion, they
are called local priorities to differentiate them from the overall priorities to be
calculated later.
 We need to do a pairwise comparison (using the numeric scale) of all the
alternatives, with respect to each criterion, included in the decision making
model.
3.Deriving Local Priorities (Preferences) for the
Alternatives

In our case, there will be three comparison matrices corresponding to the following
three comparisons:
 With respect to the cost criterion: Compare Car 1 with Car 2
 With respect to the comfort criterion: Compare Car 1 with Car 2
 With respect to the safety criterion: Compare Car 1 with Car 2
3.Deriving Local Priorities (Preferences) for the
Alternatives
 With respect to the cost criterion, which alternative is preferable: Car 1
or Car 2? ,
 Let us assume that we prefer very strongly (using the scale in Table ?)
the Car 1 over the Car 2

Table: Preference with respect to cost

3.Deriving Local Priorities (Preferences) for the
Alternatives
 With respect to the comfort criterion, which alternative is preferable: Car 1 or Car
2?
 Assume that Car 2 is strongly preferred over the Car 1(ca1-car2 =1/5)

Table: Preference with respect to comfort

3.Deriving Local Priorities (Preferences) for the
Alternatives
 With respect to the safety criterion, which alternative is preferable: Car 1 or Car
2?
 For our example, let us say the Car 2 is extremely preferable to Car 1 with
respect to this criterion.

Table: Preference with respect to safety

3.Deriving Local Priorities (Preferences) for the
Alternatives

Table: Local Priorities (or preferences) of the alternatives with respect to each criterion

To summarize:
- if our only criterion is cost, Car 1 would be our best option (priority = 0.875)
- if our only criterion is comfort, our best bet would be the Car 2 (0.833)
- if our sole purchasing criteria is safety, our best option would be the Car 2 (0.900).
3.Deriving Local Priorities (Preferences) for the
Alternatives

 Because we have two elements to compare (in our example, Car 1 and Car 2), the
respective comparison will always be consistent (CR = 0)
 The consistency must be checked if the number of elements pairwise compared is 3 or
more.
4. Derive Overall Priorities (Model Synthesis)
 In this fourth step, we need to calculate the overall priority (also called final priority)
 The overall priority needs to take into account not only our preference of alternatives for
each criterion but also the fact that each criterion has a different weight.

Table: Synthesis of the model

Overall Priority of the Car 1:

0.875 × 0.669+0.167 × 0.088 + 0.1 × 0.243 = 0.624
Overall Priority of the Car 2:

0.125 × 0.669+0.833 × 0.088 + 0.9 × 0.243 = 0,376

4. Derive Overall Priorities (Model Synthesis)

Now we can list the alternatives ordered by their overall priority or preference as follows:

Given the importance (or weight) of each buying criteria (cost, comfort, and safety):
 the Car 1 is preferable (overall priority = 0.624) compared to the Car 2 (overall
priority = 0.376)
5. Sensitivity Analysis
 The overall priorities will be heavily influenced by the weights given to the
respective criteria,
 It is useful to perform a “what-if” analysis (Sensitivity analysis ) to see how the
final results would have changed if the weights of the criteria would have been
different.
 To perform a sensitivity analysis, it is necessary to make changes to the weights
of the criterion and see how they change the overall priorities of the alternatives
6. Making a Final Decision

Based on the overall priorities and the results of the sensitivity

analysis we can express our final recommendation
Conclusion

 Group decision making

 Real-world decision-making problems are usually too complex and ill-structured to be
considered by classical decision making techniques.
 However, in many practical cases:

- The decision makers might be unable to assign exact numerical values to the evaluation.
- The presence of quantitative and qualitative criteria
- Description of some of evaluations using linguistic criteria
- Uncertainty in data regarding specific criteria

To deal with those difficulties, the fuzzy approach is usually used instead of the crisp one.
Conclusion
Handling Uncertainty in MADM
Different MCDM techniques (AHP, TOPSIS,…)were initially designed to deal only
with crisp numbers. Later, fuzzy variants of those methods were developed, because in
the real world available data are often imprecise and vague.
 Reference
1. Qu, Z., Wan, C., Yang, Z., & Lee, P. T. W. (2018). A Discourse of Multi-criteria Decision Making
(MCDM) Approaches. In Multi-Criteria Decision Making in Maritime Studies and Logistics (pp. 7-
29). Springer, Cham.
2. Mu, E., & Pereyra-Rojas, M. (2017). Understanding the analytic Hierarchy process. In Practical
Decision Making (pp. 7-22). Springer, Cham.
3. Teknomo, K. (2006). Analytic hierarchy process (AHP) tutorial. Revoledu. com, 1-20.

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