Analytic Hierarchy Process

Multi-criteria decision
making.

The Analytic Hierarchy Process

(AHP)
It

is popular and widely used

method for multi-criteria decision
making.
Allows the use of qualitative, as
well as quantitative criteria in
evaluation.
Founded by Saaty in 1980.

Typical application areas

Resource

allocation
Hiring, evaluating and promoting employees
TQM
Strategic planning
Relocation decisions
Vendor selection
Evaluating mergers and acquisitions
Selecting a car for purchasing
Deciding upon a place to visit for vacation
Deciding upon an MBA program after
graduation.

How widespread is its use?

..a few of the

thousands of
organizations using
AHP and EC

IBM
Goodyear
Ford Motor
Co.
Citibank
Xerox
Boeing
AT&T
General
Motors

NASA
IRS
FBI
Department
of Defense
World Bank
Texaco
Eastman
Kodak
InterAmerican
Bank

AHP-General Idea
Develop

an hierarchy of decision criteria and

define the alternative courses of actions.

AHP

algorithm is basically composed of two

steps:
1. Determine the relative weights of the decision
criteria
2. Determine the relative rankings (priority) of
alternatives

! Both qualitative and quantitative

information can be compared using informed
judgements to derive weights and priorities.
5

Example: Car Selection

Objective

Selecting a car
Criteria

Style, Reliability, Fuel-economy

Cost?
Alternatives

Civic Coupe, Saturn Coupe, Ford

Escort, Mazda Miata

Analytic Hierarchy Process

Step

1: Structure a hierarchy. Define the

problem, determine the criteria and identify
the alternatives.
Overall
Goal
Select the Best Toothbrush Manufacturer

Criteria
Decision
Alternatives

Cost

Reliability

Delivery Time

Cornell
Brush Pik
Picobuy

Cornell
Brush Pik
Picobuy

Cornell
Brush Pik
Picobuy

Hierarchy tree
S e le c t in g
a N ew C ar
S t y le

Civic

R e lia b ilit y

Saturn

Escort

FuelE conom y

Miata

Alternative courses of action

8

Analytic Hierarchy Process

Step

2: Make pairwise comparisons.

Rate the relative importance between
each pair of decision alternatives and
criteria.

Analytic Hierarchy Process

Step

2 (contd): AHP uses 1-9 scale for the

prioritization process.
Numerical
ratings
1
3
5
7
9

Verbal judgments
Equally important
(preferred)
Moderately more important
Strongly more important
Very strongly more
important
Extremely more important

11

Analytic Hierarchy Process

Step

2
(contd):
Intermediate
numerical ratings of 2, 4, 6, and 8 can
be assigned. If someone could not
decide
whether
one
criterion
(alternative) is moderately more
important than the other one or
strongly more important than the
other
one,
4
(moderately
to
strongly more important) can be
assigned.

Analytic Hierarchy Process

Step

3: Synthesize the results to

determine the best alternative. Obtain
the final results.
The output of AHP is the set of
priorities of the alternatives.

An Example with AHP

Choosing the most satisfied

school
Goal:

To select new car.

Criteria: price, MPG, comfort and
style
Alternatives: car A, car B, car C

Hierarchy Development
The

first step in the AHP is to develop a

graphical representation of the problem in
terms of the overall goal, the criteria, and
the decision alternatives.

Overall Goal:

Criteria:
Decision
Alternatives:

Select the Best Car

Price

MPG

Comfort

Style

Car A

Car A

Car A

Car A

Car B

Car B

Car B

Car B

Car C

Car C

Car C

Car C

Example: Synthesizing
Procedure - 1
Step 1: Sum the values in each column.
Comfort

Car A Car B Car C

Car A

Car B

1/2

Car C

1/8
13/8

1/6
19/6

1
15

Column totals

Example: Synthesizing
Procedure - 2
Step 2: Divide each element of the matrix by
its column total.
All columns in the normalized pairwise
comparison matrix now have a sum of 1.

Comfort

Car A Car B Car C

Car A

8/13 12/19

8/15

Car B

4/13

6/19

6/15

Car C

1/13

1/19

1/15

Example: Synthesizing
Procedure - 3
Step 3: Average the elements in each row.
The values in the normalized pairwise
comparison matrix have been converted
to decimal form.
The result is usually represented as the
(relative) priority vector (eigen vector).

Comfort

Car A Car B

Car C

Row Avg.

Car A

0.615

0.632

0.533

0.593 0.593

Car B

0.308

0.316

0.400

0.341

Car C

0.077

0.053

0.067
Total

0.066
1.000

0.341

0.066

Consistency - 1
An

important consideration in terms of

the quality of the ultimate decision
relates to the consistency of
judgments that the decision maker
demonstrated during the series of
pairwise comparisons.
It should be realized perfect consistency is
very difficult to achieve and that some lack
of consistency is expected to exist in
almost any set of pairwise comparisons.
Example:

Consistency - 2
To

handle the consistency question,

the AHP provides a method for
measuring the degree of consistency
among the pairwise judgments
provided by the decision maker.
If the degree of consistency is acceptable,
the decision process can continue.
If the degree of consistency is
unacceptable, the decision maker should
reconsider and possibly revise the pairwise
comparison judgments before proceeding
with the analysis.

Consistency Ratio
The

AHP provides a measure of

the consistency of pairwise
comparison judgments by
computing a consistency ratio
The ratio is designed in such a way
that values of the ratio exceeding
0.10 are indicative of inconsistent
judgments.
Although the exact mathematical
computation of the consistency ratio
is beyond the scope of this text, an

Procedure: Estimating Consistency

Ratio - 1
Step 1: Multiply each value in the first
column of the pairwise comparison
matrix by the relative priority of
the first item considered. Same
procedures for other items. Sum
the values across the rows to
obtain a vector of values labeled
weighted sum.
Step 2: Divide the elements of the
vector of weighted sums obtained
in Step 1 by the corresponding
priority value.

Procedure: Estimating Consistency

Ratio - 2
Step 4: Compute the consistency index
(CI):
max n
CI
n 1

Where n is the number of items being

compared

CI
Step
CR 5: Compute the consistency ratio
RI

(CR):

Where RI is the random index, which is the

consistency index of a randomly generated
pairwise comparison matrix. It can be shown

Random Index

Random index (RI) is the consistency

index of a randomly generated pairwise
comparison matrix.

RI depends on the number of elements

being compared (i.e., size of pairwise
comparison matrix) and takes on the
n
1
2 values:
3
4
5
6
7
8
9
following

RI

10

0.00 0.00 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.49

Example: Inconsistency
Preferences: If, A B (2); B C (6)
Then, A C (4) (should be 8)
Inconsistency

Comfort

Car A Car B Car C

Car A

Car B

1/2

Car C

1/8

1/6

Example: Consistency Checking

-1
Step 1: Multiply each value in the first column of the
pairwise comparison matrix by the relative
priority of the first item considered. Same
procedures for other items. Sum the values
across the rows to obtain a vector of values
labeled weighted sum.
1
2
8 0.593 0.682 0.528 1.803
0.593 1 2 0.341 1 0.066 6 0.297 0.341 0.396 1.034
1 8
1 6
1 0.074 0.057 0.066 0.197

Example: Consistency Checking

-2
Step 2: Divide the elements of the vector of
weighted sums by the corresponding
priority value.
1.803 0.593 3.040
1.034 0.341 3.032

0.197 0.066 2.985

Step 3: Compute the average of the values computed in

step 2 (max).
max

3.040 3.032 2.985

3.019
3

Example: Consistency Checking

-3
Step 4: Compute the consistency index (CI).
max n 3.019 3
CI

0.010
n 1
3 1

Step 5: Compute the consistency ratio (CR).

CI 0.010
CR

0.017 0.10
RI 0.58

The degree of consistency exhibited in the pairwise comparison

matrix for comfort is acceptable.

Development of Priority
Ranking
The

overall priority for each

decision alternative is obtained
by summing the product of the
criterion priority (i.e., weight)
(with respect to the overall goal)
times the priority (i.e.,
preference) of the decision
alternative with respect to that
criterion.
Ranking these priority values, we
will have AHP ranking of the

Example: Priority Ranking 0A

Step 0A: Other pairwise comparison
matrices
Comfort

Car A

Car A

Car B

Car B

1
Criterio
n
1/2

Car C

Price
1/8

Price

1/6

1 1
1/3
Car
1/2 C

MPG

MPG

Car C

CarComfort
A Car B

Car A

1
Style

1/4

Car B

1/21/6
1/3

Car C

Price

Car A

Car B

Car C

1Style 1/3

4 2
2
1/4
1/4
1Car A 1/2Car B

Car Comfort
A
MPG
Car B
3 C
Car
1
Style

4
Car
4 A
Car B
Car C

1 1 1/3
3
1
1/4

1/7

Car C
4
7
1

Ranking of Criteria
Criterion

Price

MPG

Comfort

Style

Price

MPG

1/3

1/4

Comfort

1/2

Style

1/2

Column
total

7/3

Criterion

Price

MPG

Comfort

Style

Price

3/7

3/12

8/21

8/15

1/4

MPG

1/7

1/12

1/21

1/15

1/2

Comfort

3/14

4/12

4/21

2/15

Style

3/14

4/12

8/21

4/15

12

21/4

15/4

Criterion
Criterion

Price

MPG

Comfort

Style

Row
Average

Price

0.42

0.25

0.38

0.53

0,398

MPG

0.143

0.083

0.048

0.067

0,085

Comfort

0.214

0.33

0.19

0.133

0,218

Style

0.214

0.33

0.381

0.267

0,299

0.398
0.085

0.218

0
.
299

Price
MPG
Comfort
Style

0.398
0.085

0.218

0.299
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Example: Priority Ranking 0B

Step 0B: Calculate priority vector for each
matrix.
Price MPG Comfort Style
Criterion
Car A
Car B
Car C

0.123
0.320

0.557

0.087
0.274

0.639

0.593
0.341

0.066

0.265
0.655

0.080

Price
MPG
Comfort
Style

0.398
0.085

0.218

0
.
299

Comfort

Car A

Car B

Car C

Row Avg.

Car A

0.615

0.632

0.533

0.593

Car B

0.308

0.316

0.400

0.341

Car C

0.077

0.053

0.067

0.066

Total

1.000

0.593
0.341

0.066

Ranking of Criteria
Selecting a New Car
1.00

Comfort
0.218
Car A 0.593
Car B 0.341

Price
0.398

Car C 0.066

MPG
0.085

Style
0.299

Car A 0.123

Car A 0.087

Car A 0.265

Car C 0.557

Car C 0.639

Car C 0.080

Car B 0.320

Car B 0.274

Car B 0.655

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Ranking of Alternative
MPG Comfort Style

0.123
0.320

0.087
0.274

0.639

0.593
0.341

0.066

0.265
0.655

0.080

Criterion
Price
MPG
Comfort
Style

0.398
0.085

0.218

0.299

Comfo
rt
Style

MPG

0.557

Price

Car A
Car B
Car C

Price

Car A 0.123 0.087 0.593 0.265

Car B 0.320 0.274 0.341 0.655
Car C 0.557 0.639 0.066 0.080

0.398
0.085

0.218

0.299

0.265
0.527

0.338

Car B is the
best alternative

Priority matrix
Criteria Weights

35

Complex decisions
Many levels of criteria and sub-criteria exists for
complex problems.

36

AHP Software:
Professional commercial software Expert
Choice developed by Expert Choice Inc. is
available which simplifies the implementation
of the AHPs steps and automates many of its
computations
computations
sensitivity analysis
graphs, tables

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More about AHP: Pros and Cons

AHP is technique for formalizing decision making such that
It is applicable when it is difficult to formulate criteria evaluations, i.e., it allows
qualitative evaluation as well as quantitative evaluation.
It is applicable for group decision making environments
However
There are hidden assumptions like consistency
Difficult to use when there are large number of evaluations
Use GDSS
Use constraints to
eliminate some
alternatives
Difficult to add a new criterion or alternative
ratio if applicable

Use cost/benefit

Difficult to take out an existing criterion or alternative, since

the best alternative might differ if the worst one is excluded.

38

Group Decision Making

The AHP allows group decision making, where group members can use their
experience, values and knowledge to break down a problem into a hierarchy
and solve. Doing so provides:
Understand the conflicting ideas in the organization and try to reach a
consensus.
Minimize dominance by a strong member of the group.
Members of the group may vote for the criteria to form the AHP tree.
(Overall priorities are determined by the weighted averages of the priorities
obtained from members of the group.)
However;
The GDSS does not replace all the requirements for group decision making.
Open meetings with the involvement of all members are still an asset.

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References
Al Harbi K.M.A.S. (1999), Application of AHP in Project Management, International
Journal of Project Management, 19, 19-27.
Haas R., Meixner, O., (2009) An Illustrated Guide to the Analytic Hierarchy Process,
Lecture Notes, Institute of Marketing & Innovation, University of Natural Resources
and http://www.boku.ac.at/mi/
Saaty, T.L., Vargas, L.G., (2001), Models, Methods, Concepts & Applications of the
Analytic Hierarchy Process, Kluwers Academic Publishers, Boston, USA.

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Exercise

41

Case
A motorist is using the AHP to choose a new car from three possible
models: an Arrow, a bestmobile and a commuter. The choice will be
based on just two attributes: cost and style. The motorist considers
that cost is weakly more important than style.
When asked to compare the costs of the cars, the motorist makes
the followig statements: on cost, the bestmobile is weakly preferred
to the arrow, but the arrow is weakly preferred to the commuter. Also
the bestmobile is extremely preferred to the commuter.
On style, the arrow is very strongly preferred to the bestmobile, but
the commuter is weakly preferred to the arrow. Also the commuter is
extremely preferred to the bestmobile.
a. Construct a hierarchy to represent the decision problem
b. Calculate the weight for each table in hierarchy and hence
determine which car should be purchased
c. Calculate the inconsistency ratios for the motorist comparisons of
the cars on (i) cost and (ii) style and interpret your results

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