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FIGURE 16 poorly.

Suppose that Germany will suffer defeat if it


Value of performs poorly on either front. If these attributes ex-
attribute 2 hibit mui, what would be the sign of k3?
e General Motors has domestic and international divi-
sions. Let attribute 1  profits in the domestic division
x'2 and attribute 2  profits in the international division.
B C Suppose General Motors is reasonably happy if at least
one division has a good year but is very unhappy if both
divisions have a bad year. If these attributes exhibit mui,
x2 what would be the sign of k3?
A D

Value of
x1 x'1 attribute 1

13.7 The Analytic Hierarchy Process


In Section 13.6, we discussed situations in which a decision maker chooses between alter-
natives on the basis of how well the alternatives meet various objectives. For example, in
determining which job offer to accept, a job seeker (call her Jane) might choose between
the offers by determining how well each one meets the following four objectives:
Objective 1 High starting salary (SAL)
Objective 2 Quality of life in city where job is located (QL)
Objective 3 Interest in work (IW)
Objective 4 Job location near family and relatives (NF)
When multiple objectives are important to a decision maker, it may be difficult to choose
between alternatives. For example, one job offer may offer the highest starting salary, but
it may score poorly on the other three objectives. Another job offer may meet objectives
2–4 but have a low starting salary. In such a case, it may be difficult for Jane to choose
between job offers. Thomas Saaty’s analytic hierarchy process (AHP) provides a pow-
erful tool that can be used to make decisions in situations involving multiple objectives.
To illustrate how the AHP works, let’s suppose that Jane has three job offers and must
determine which offer to accept. For the ith objective (in this example, i  1, 2, 3, 4), the
AHP generates (by a method to be described shortly) a weight wi (i  1, 2, 3, 4) for the
ith objective. For convenience, the chosen weights always sum to 1. Suppose that for this
example, we have found Jane’s weights to be
w1  .5115, w2  .0986, w3  .2433, w4  .1466
(These weights fail to add up to 1 due to rounding.) The weights indicate that a high start-
ing salary is the most important objective, followed by interest in work, nearness to fam-
ily, and quality of life in the city where the job is located.
Next suppose (again by a method that is soon to be described) that Jane can determine
how well each job “scores” on each objective. For example, suppose Jane determines that
each job scores on each objective as shown in Table 13. For example, job 1 best meets
the objective of a high starting salary but “scores” worst on all other objectives.
Given Jane’s weights and the score of each job on each objective, how can she deter-
mine which job offer to accept? For the jth job offer ( j  1, 2, 3), compute job offer j’s
overall score as follows:
i4

 wi (job offer j’s score on objective i)


i1

1 3 . 7 The Analytic Hierarchy Process 785


TA B L E 13
Jane’s “Score” for Each Job and Objective
Objective Job 1 Job 2 Job 3

Salary .571 .286 .143


Quality of life .159 .252 .589
Interest in work .088 .669 .243
Proximity to family .069 .426 .506

Now choose the job offer with the highest overall score. Note that the overall score gives
more weight to a job offer’s score on the more important objectives. Computing each job’s
overall score, we obtain
Job 1 overall score  .5115(.571)
.0986(.159)
.2433(.088)

.1466(.069)  .339
Job 2 overall score  .5115(.286)
.0986(.252)
.2433(.669)

.1466(.426)  .396
Job 3 overall score  .5115(.143)
.0986(.589)
.2433(.243)

.1466(.506)  .265
Thus, the AHP would indicate that Jane should accept job 2.

Obtaining Weights for Each Objective

Suppose there are n objectives. We begin by writing down an n  n matrix (known as the
pairwise comparison matrix) A. The entry in row i and column j of A (call it aij) indi-
cates how much more important objective i is than objective j. “Importance” is to be mea-
sured on an integer-valued 1–9 scale, with each number having the interpretation shown
in Table 14. For all i, it is necessary that aii  1. If, for example, a13  3, objective 1 is
weakly more important than objective 3. If aij  k, then for consistency, it is necessary
that aji  1k. Thus, if a13  3, then a31  13 must hold.
Suppose that Jane has identified the following pairwise comparison matrix for her four
objectives (SAL  high salary; QL  high quality of life; IW  interest in work; NF 
nearness to family):
SAL QL IW NF


SAL 1 5 2 4
1
QL  1 1 1
5 2 2
1
IW  2 1 2
2
1
NF  2 1 1
4 2

Unfortunately, some of Jane’s pairwise comparisons are inconsistent. To illustrate the


meaning of consistency, note that since a13  2, she feels SAL is twice as important as
IW. Since a32  2, she also believes that IW is twice as important as QL. Consistency of
preferences would imply that Jane should feel that SAL is 2(2)  4 times as important
as QL. Since a12  5, however, Jane believes that SAL is 5 times as important as QL.
This shows that Jane’s pairwise comparisons exhibit a slight inconsistency. Slight incon-
sistencies are common and do not cause serious difficulties. An index that can be used to
measure the consistency of Jane’s preferences will be discussed later in this section.

786 CHAPTER 1 3 Decision Making under Uncertainty


TA B L E 14
Interpretation of Entries in a Pairwise Comparison Matrix
Value of aij Interpretation

1 Objective i and j are of equal importance.


3 Objective i is weakly more important than objective j.
5 Experience and judgment indicate that objective i is strongly
more important than objective j.
7 Objective i is very strongly or demonstrably more important
than objective j.
9 Objective i is absolutely more important than objective j.
2, 4, 6, 8 Intermediate values—for example, a value of 8 means that
objective i is midway between strongly and absolutely more
important than objective j.

Suppose there are n objectives. Let wi  the weight given to objective i. To describe
how the AHP determines the wi’s, let’s suppose the decision maker is perfectly consistent.
Then her pairwise comparison matrix should be of the following form:


w w w
A  1 1  1 (13)
w1 w2 wn
w2 w2 w
   2
A  w1 w2 wn (13)
  
  
wn wn wn
   
w1 w2 wn
For example, suppose that w1  12 and w2  16. Then objective 1 is three times as impor-
tant as objective 2, so
w
a12  1  3
w2
Now suppose that a consistent decision maker has a pairwise comparison matrix A of the
form (13). How can we recover the vector w  [w1 w2  wn] from A? Consider the
system of n equations
AwT  wT (14)

where  is an unknown number and wT is an unknown n-dimensional column vector. For


any number , (14) always has the trivial solution w  [0 0  0]. It can be shown
that if A is the pairwise comparison matrix of a perfectly consistent decision maker (that is,
if A is of the form (13)) and we do not allow   0, then the only nontrivial solution to
(14) is   n and w  [w1 w2  wn]. This shows that for a consistent decision maker,
the weights wi can be obtained from the only nontrivial solution to (14). Now suppose that
the decision maker is not perfectly consistent. Let max be the largest number for which (14)
has a nontrivial solution (call this solution wmax). If the decision maker’s comparisons do
not deviate very much from perfect consistency, we would expect max to be close to n and
wmax to be close to w. Saaty verified that this intuition is indeed correct and suggested ap-
proximating w by wmax. Saaty also proposed measuring the decision maker’s consistency by
looking how close max is to n. The software package Expert Choice gives (among other
outputs) exact values of max and wmax and a measure of the decision maker’s consistency.

1 3 . 7 The Analytic Hierarchy Process 787


In what follows, we outline a simple method (easily implemented on any spreadsheet) that
can be used to approximate max and wmax and an index of consistency.
To approximate wmax, we use the following two-step procedure:
Step 1 For each of A’s columns, do the following. Divide each entry in column i of A by the
sum of the entries in column i. This yields a new matrix (call it Anorm, for normalized) in which
the sum of the entries in each column is 1. For Jane’s pairwise comparison matrix, step 1 yields


.5128 .5000 .5000 .5333
.1026 .1000 .1250 .0667
Anorm 
.2564 .2000 .2500 .2667
.1282 .2000 .1250 .1333
Step 2 To find an approximation to wmax (to be used as our estimate of w), proceed as
follows. Estimate wi as the average of the entries in row i of Anorm. This yields (as previ-
ously stated)
.5128
.5000
.5000
.5333
w1    .5115
4
.1026
.1000
.1250
.0667
w2    .0986
4
.2564
.2000
.2500
.2667
w3    .2433
4
.1282
.2000
.1250
.1333
w4    .1466
4
Intuitively, why does w1 approximate the weight that objective 1 (salary) should be given?
The percentage of the weight that SAL is given in pairwise comparisons of each objec-
tive to SAL is .5128. Similarly, .50 represents the percentage of total weight that SAL is
given in pairwise comparisons of each objective to QL. Thus, we see that the four num-
bers averaged to obtain w1 each represents in some way a measure of the total weight at-
tached to SAL. Thus, averaging these numbers should give a good estimate of the per-
centage of the total weight that should be given to SAL.

Checking for Consistency


We can now use the following four-step procedure to check for the consistency of the decision
maker’s comparisons. (From now on, w denotes our estimate of the decision maker’s weights.)
Step 1 Compute AwT. For our example, we obtain

  
1 5 2 4 .5115 2.0775
1 1 1 1 .0986 0.3959
AwT  5
1
2 2

 2 1 2 .2433 0.9894
2
1
 2 1 1 .1466 0.5933
4 2

Step 2 Compute
in
ith entr y in AwT
1
n  
i1 ith en try in w
T

 

1 2.0775 .3959 .9894


  



4 .5115 .0986 .2433
.5933
.1466
 4.05

788 CHAPTER 1 3 Decision Making under Uncertainty


TA B L E 15
Values of the
Random Index (RI)
n RI

2 0
3 .58
4 .90
5 1.12
6 1.24
7 1.32
8 1.41
9 1.45
10 1.51

Step 3 Compute the consistency index (CI) as follows:


(Step 2 result)  n 4.05  4
CI      .017
n1 3
Step 4 Compare CI to the random index (RI) for the appropriate value of n, shown in
Table 15.
For a perfectly consistent decision maker (see Problem 5), the ith entry in AwT  n
(ith entry of wT ). This implies that a perfectly consistent decision maker has CI  0. The
values of RI in Table 15 give the average value of CI if the entries in A were chosen at
random, subject to the constraint that all diagonal entries must equal 1 and
1
aij  
aji
If CI is sufficiently small, the decision maker’s comparisons are probably consistent enough
to give useful estimates of the weights for his or her objective function. If RCII .10, the
degree of consistency is satisfactory, but if RCII  .10, serious inconsistencies may exist, and
the AHP may not yield meaningful results. In our example, RCII   .01
7
.90
 .019 .10; thus,
Jane’s pairwise comparison matrix does not exhibit any serious inconsistencies.

Finding the Score of an Alternative for an Objective


We have now described how to determine the objective function weights that we earlier
used to help Jane determine which job offer to accept. We now determine how well each
job “satisfies” or “scores” on each objective. To determine these scores, we construct for
each objective a pairwise comparison matrix in which the rows and columns are Jane’s
possible decisions (in this case, job offers). For SAL, suppose we obtain the following
pairwise comparison matrix:
Job 3 Job 1 Job 2 Job 3


Job 1 1 2 4
Job 2 1 1 2
2
1 1
Job 3  1
4 2

1 3 . 7 The Analytic Hierarchy Process 789


Thus, for example, with respect to salary, job 1 is better (between weakly and strongly)
than job 3. We can now apply our procedure for generating weights to the SAL pairwise
comparison matrix. We obtain


.571 .571 .571
Anorm  .286 .286 .286
.143 .143 .143
This yields w  [.571 .286 .143]. These weights indicate how well each job “scores” with
respect to the SAL objective. As previously stated in Table 13, we obtain
Job 1 salary score  .571
Job 2 salary score  .286
Job 3 salary score  .143
Since all three columns of the pairwise comparison matrix for salary are identical, Jane’s
pairwise comparisons for salary exhibit perfect consistency.
Suppose Jane’s pairwise comparison matrix for quality of life (QL) is as follows:
Job 3 Job 1 Job 2 Job 3


Job 1 1 1 1
2 3
Job 2 2 1 1
3
Job 3 3 3 1
Then


1 1
  1
6 9 5
Anorm  1

3
2

9
1

5
1 6 3
  
2 9 5

and we obtain
1
1
1
6 9 5
Job 1 quality of life score    .159
3
1
2
1
3 9 5
Job 2 quality of life score    .252
3
1
6
3
2 9 5
Job 3 quality of life score    .589
3
For interest in work, suppose the pairwise comparison matrix is as follows:
Job 3 Job 1 Job 2 Job 3


Job 1 1 1 1
7 3
Job 2 7 1 3
Job 3 3 1 1
3

It can easily be shown that


Job 1 interest in work score  .088
Job 2 interest in work score  .669
Job 3 interest in work score  .243

790 CHAPTER 1 3 Decision Making under Uncertainty


Finally, for nearness to family, suppose the pairwise comparison matrix is as follows:
Job 3 Job 1 Job 2 Job 3


Job 1 1 1 1
4 7
Job 2 4 1 2
Job 3 7 2 1
Routine calculations yield
Job 1 score for nearness to family  .069
Job 2 score for nearness to family  .426
Job 3 score for nearness to family  .506
As described earlier, we can now “synthesize” the objective weights with the scores of
each job on each objective to obtain an overall score for each alternative (in this case,
each job offer). As before, we find that job offer 2 is most preferred, followed by job of-
fer 1, with job offer 3 the least preferred.
We close by noting that AHP has been applied by decision makers in countless areas,
including accounting, finance, marketing, energy resource planning, microcomputer se-
lection, sociology, architecture, and political science. See Zahedi (1986) and Saaty (1988)
for a discussion of applications of AHP.

Implementing AHP on a Spreadsheet


AHP.xls Figure 17 illustrates how easy it is to implement AHP on a spreadsheet (file AHP.xls). En-
ter in the pairwise comparison matrix for objectives in B7:E10. In B12 enter the formula
B7/SUM(B$7:B$10) and copy this to the range B12:E15, yielding Anorm for objectives.
Compute the weight for salary in F12 with the command AVERAGE(B12:E12). Copy
this to F12:F15 to compute the weights of the remaining objectives. In a similar fashion,
the normalized matrices and weights for each objective are obtained.
To determine the score for job 1, enter into F17 the formula
F$12 * F21
F$13 * F29
F$14 * F37
F$15 * F45
Copying this formula to F17:F19 computes the score for jobs 2 and 3. Again, we see that
job 2 receives the highest score (indicated by ****).
To compute the consistency index for the pairwise comparison matrix for objectives,
the Excel matrix multiplication function MMULT is used, computing AwT in the range
C2:C5. In the range D2:D5 compute (ith entry in AwT)/(ith entry in wT). Finally, in E2
compute the CI, using the formula (AVERAGE(D2:D5)  4)/3.
Using the Excel MMULT function, it is easy to multiply matrices. To illustrate, we will
Mmult.xls use Excel to find the matrix product AB (see Figure 18 and file Mmult.xls). We proceed
as follows:
Step 1 Enter A and B in D2:F3 and D5:E7, respectively.
Step 2 Select the range (D9:E10) in which the product AB will be computed.
Step 3 In the upper left-hand corner (D9) of the selected range, type the formula
 MMULT(D2:F3,D5:E7)
Then hit CONTROL SHIFT ENTER (not just ENTER), and the desired matrix product
will be computed. Note that MMULT is an array function, not an ordinary spreadsheet
function. This explains why we must preselect the range for AB and use CONTROL
SHIFT ENTER.

1 3 . 7 The Analytic Hierarchy Process 791


FIGURE 17
AHP Spreadsheet
A B C D E F G
1 CONSISTENCY INDEX AwT/wT CI
2 IMPLEMENTING 2.0774038 4.0610902 0.0158569
3 AHP AwT= 0.3958173 4.0160976
4 ON 0.9894231 4.0671937
5 A SPREADSHEET 0.5932692 4.0459016
6 OBJECTIVES MATRIX SAL QL IW NF
7 SAL 1 5 2 4
8 QL 0.2 1 0.5 0.5
9 IW 0.5 2 1 2
10 NF 0.25 2 0.5 1
11 ANORM(OBJECTIVES) SAL QL NF IW WEIGHTS
12 SAL 0.512820513 0.5 0.5 0.5333333 0.5115385 SAL
13 QL 0.102564103 0.1 0.125 0.0666667 0.0985577 QL
14 NF 0.256410256 0.2 0.25 0.2666667 0.2432692 IW
15 IW 0.128205128 0.2 0.125 0.1333333 0.1466346 NF
16 SALARY MATRIX JOB1 JOB2 JOB3
17 JOB1 1 2 4 JOB1SC= 0.3395156
18 JOB2 0.5 1 2 JOB2SC= 0.3960857 ****
19 JOB3 0.25 0.5 1 JOB3SC= 0.2643988
20 ANORM(SALARY) JOB1 JOB2 JOB3 WEIGHTS
21 JOB1 0.571428571 0.5714286 0.5714286 0.5714286 JOB1
22 JOB2 0.285714286 0.2857143 0.2857143 0.2857143 JOB2
23 JOB3 0.142857143 0.1428571 0.1428571 0.1428571 JOB3
24 QL MATRIX JOB1 JOB2 JOB3
25 JOB1 1 0.5 0.3333333
26 JOB2 2 1 0.3333333
27 JOB3 3 3 1
28 ANORM(QL) JOB1 JOB2 JOB3 WEIGHTS
29 JOB1 0.166666667 0.1111111 0.2 0.1592593 JOB1
30 JOB2 0.333333333 0.2222222 0.2 0.2518519 JOB2
31 JOB3 0.5 0.6666667 0.6 0.5888889 JOB3
32 IW MATRIX JOB1 JOB2 JOB3
33 JOB1 1 0.1428571 0.3333333
34 JOB2 7 1 3
35 JOB3 3 0.3333333 1
36 ANORM(IW) JOB1 JOB2 JOB3 WEIGHTS
37 JOB1 0.090909091 0.0967742 0.0769231 0.0882021 JOB1
38 JOB2 0.636363636 0.6774194 0.6923077 0.6686969 JOB2
39 JOB3 0.272727273 0.2258065 0.2307692 0.243101 JOB3
40 NF MATRIX JOB1 JOB2 JOB3
41 JOB1 1 0.25 0.1428571
42 JOB2 4 1 2
43 JOB3 7 2 1
44 ANORM(NF) JOB1 JOB2 JOB3 WEIGHTS
45 JOB1 0.083333333 0.0769231 0.0454545 0.0685703 JOB1
46 JOB2 0.333333333 0.3076923 0.6363636 0.4257964 JOB2
47 JOB3 0.583333333 0.6153846 0.3181818 0.5056333 JOB3

792 CHAPTER 1 3 Decision Making under Uncertainty