DECISION THEORY

Decision theory discussed a set of quantitative methods for reaching

optimal decisions.

Technique for Order Preference

by Similarity to Ideal Solution

(TOPSIS)
TOPSIS Method in MADM 1
 Origin and History
1980: development by Kwangsun Yoon and
Hwang Ching-Lai
– Yoon, K., “System Selection by Multiple
Attribute Decision Making,” Ph. D.
Dissertation, Kansas State University,
Manhattan, Kansas, 1980.
– Yoon, K. and C. L. Hwang, “TOPSIS
(Technique for Order Preference by
Similarity to Ideal Solution)- A Multiple
Attribute Decision Making,” a paper to be
published, 1980.
TOPSIS Method in MADM 2
 Basic Concept

l The chosen Alternative should have the

shortest distance from the ideal solution
and the farthest from the negative-ideal
solution.

TOPSIS Method in MADM 3

 Basic Concept …
Attribute X2 (increasing preference)
A+

. .
. .
.
A1 . A
2

. .
.
A-
Attribute X1 (increasing preference)

It is very difficult to justify the selection of A1 or A2

TOPSIS Method in MADM 4
 Decision Matrix
l m Alternative, n Attributes (or criteria)

x 1 x 2 x 3
. . . x n

A  x
1 11 x 12 x 13
. . . x 

1n

A x
2 21 x 22 x 23
. . . x 2n 

A  x
3 31 x 32 x 33
. . . x 3n


D= .  . . . . 
.  . . . . 
 
.  . . . . 
 
Am  x m1 x m2 x m3
. . . x mn
TOPSIS Method in MADM 5
 Hypothesis-1

l Each Attribute in the Decision Matrix

takes either monotonically increasing or
monotonically decreasing utility

TOPSIS Method in MADM 6

 Hypothesis-2

l A Set of Weights for the Attributes is

required

TOPSIS Method in MADM 7

 Hypothesis-3

l Any Outcome which is expressed in a

non-numerical way, should be quantified
through the appropriate scaling
technique

TOPSIS Method in MADM 8

 Steps-1
l Construct the Normalized Decision Matrix
– To transform the various attribute dimensions
into non-dimensional attributes, which allows
comparison across the attributes

=
x ij
r ij m

∑x
2
ij
i =1

TOPSIS Method in MADM 9

 Steps-2
l Construct the Weighted Normalized Decision
Matrix
 v11 v . . . v . . . v   w1 r11 wr . . . wr . . . wr 
   
12 1j 1n 2 12 j ij n 1n

 . . . .   . . . . 
 . . . .   . . . . 
   
 . . . .   . . . . 
V =  vi1 v v vin  =  w1 ri1 wr wr wn rin 
 i2 ij 2 i2 j ij

 . . . .   . . . . 
 . . . .   . . . . 
   
 . . . .   . . . . 
   
vm1 v
m2
. . . v
mj
. . . vmn w1 r m1
  wr
2 m2
. . . wr
j mj
. . . wn r mn

TOPSIS Method in MADM 10
 Steps-3
l Determine Ideal and Negative-Ideal Solutions
+
= {( max vij j ∈ J ), ( min vij j ∈ J ) i = 1,2,...m}
'
A i i
+ + + +
= {v1 , v2 ,..., v j ,..., vn}
−
= {( min vij j ∈ J ), ( max vij j ∈ J ) i = 1,2,...m}
'
A i i
− − − −
= {v1 , v2 ,..., v j ,..., v n}

where J =  j = 1,2,..., n j associated with benefit criteria 

 
=  j = 1,2,..., n j criteria 
'
J 
associated with cos t

TOPSIS Method in MADM 11
 Steps-4
l Calculate the Separation Measure:
– Ideal Separation
n

∑ (v − v )
+ + 2
s i
= ij j
i = 1,2,..., m
j =1

– Negative-Ideal Separation
n

∑ vij v j
− −
s i
= ( − ) 2
i = 1,2,..., m
j =1

TOPSIS Method in MADM 12

 Steps-5
l Calculate the Relative Closeness to the Ideal
Solution
−
*
= s i +
0 < c i < 1, i = 1,2,..., m
c i +
( si + si )
−
,

+
=1 A=A
*
c i
if i

* −
c i
=0 if A=A i

TOPSIS Method in MADM 13

 Steps-6
l Rank the preference order
– A set of alternatives can now be preference
*
ranked according to the descending order of c i

TOPSIS Method in MADM 14

 An example of using
TOPSIS Method
Weight 0.1 0.4 0.3 0.2
Style Reliability Fuel Eco. Cost
Civic 7 9 9 8

Saturn 8 7 8 7

Ford 9 6 8 9

Mazda 6 7 8 6

TOPSIS Method in MADM 15

 Steps of TOPSIS
l Step 1: Calculate (Σx2ij )1/2 for each column
and divide each column by that to get rij

Style Rel. Fuel Cost

Civic 0.46 0.61 0.54 0.53
Saturn 0.53 0.48 0.48 0.46
Ford 0.59 0.41 0.48 0.59
Mazda 0.40 0.48 0.48 0.40

TOPSIS Method in MADM 16

 Steps of TOPSIS

l Step 2 : Multiply each Column by wj to get Vij.

Style Rel. Fuel
Cost
Civic 0.046 0.244 0.162 0.106
Saturn 0.053 0.192 0.144 0.092
Ford 0.059 0.164 0.144 0.118
Mazda 0.040 0.192 0.144 0.080

TOPSIS Method in MADM 17

 Steps of TOPSIS

Step 3 (a): Determine Ideal Solution A*.

A* = {0.059, 0.244, 0.162, 0.080}
Style Rel. Fuel Cost
Civic 0.046 0.244 0.162 0.106
Saturn 0.053 0.192 0.144 0.092
Ford 0.059 0.164 0.144 0.118
Mazda 0.040 0.192 0.144 0.080
TOPSIS Method in MADM 18
 Steps of TOPSIS

Step 3 (b): Find Negative Ideal Solution A-.

A- = {0.040, 0.164, 0.144, 0.118}

Style Rel. Fuel Cost

Civic 0.046 0.244 0.162 0.106
Saturn 0.053 0.192 0.144 0.092

Ford 0.059 0.164 0.144 0.118

Mazda 0.040 0.192 0.144 0.080
TOPSIS Method in MADM 19
 Steps of TOPSIS

Step 4 (a): Determine Separation From Ideal Solution

A* = {0.059, 0.244, 0.162, 0.080}
Si* = [ Σ (vj*– vij)2 ] ½ for each row j

Style Rel. Fuel Cost

Civic (.046-.059)2 (.244-.244)2 (0)2 (.026)2

Saturn (.053-.059)2 (.192-.244)2 (-.018)2 (.012)2

Ford (.053-.059)2 (.164-.244)2 (-.018)2 (.038)2

Mazda (.053-.059)2 (.192-.244)2 (-.018)2 (.0)2
TOPSIS Method in MADM 20
 Steps of TOPSIS

Step 4 (a): Determine Separation From Ideal

Solution Si*
Σ(vj*–vij)2 Si* = [ Σ (vj*– vij)2 ] ½

Civic 0.000845 0.029

Saturn 0.003208 0.057

Ford 0.008186 0.090

Mazda 0.003389 0.058

TOPSIS Method in MADM 21
 Steps of TOPSIS

Step 4: Determine Separation From Negative

Ideal Solution Si-
Σ(vj-–vij)2 Si- = [ Σ (vj-– vij)2 ]½

Civic 0.006904 0.083

Saturn 0.001629 0.040

Ford 0.000361 0.019

Mazda 0.002228 0.047
TOPSIS Method in MADM 22
 Steps of TOPSIS

Step 5: Calculate the relative closeness to the

ideal solution Ci* = S-i / (Si* +S-i )
S-i /(Si*+ S-i) Ci*

Civic 0.083/0.112 0.74 ← BEST

Saturn 0.040/0.097 0.41

Ford 0.019/0.109 0.17 ← WORSE

Mazda 0.047/0.105 0.45
TOPSIS Method in MADM 23