Multicriteria Decision Making

Analytic Hierarchy Process (AHP) for

Multi-Criteria Decision Making
 What is AHP?
•

Definition: A structured technique for organizing and

analyzing complex decisions using pairwise
comparisons.
•Inventor: Thomas Saaty (1977).
•Key Idea: Breaks down decisions into hierarchies of
criteria and alternatives.
•Applications: Business strategy, healthcare,
engineering, and more.
Visual: Show a simple hierarchy (Goal → Criteria →
Alternatives).
 Why Use AHP?
• AHP is a flexible and systematic decision-making
tool.
• Best for problems with multiple criteria and
alternatives.
• Handles subjective and objective criteria.
• Measures consistency of decision-makers.
• Provides transparent and logical rankings.
Visual: Comparison of AHP vs. traditional voting
methods.
 AHP Steps Overview

• Define the goal (e.g., "Select the best laptop").

• Build the hierarchy (Goal → Criteria →
Alternatives).
• Perform pairwise comparisons.
• Calculate weights and check consistency.
• Rank alternatives
 Examples

• Buying a house
– Cost, proximity of schools, trees, nationhood,
public transportation
• Buying a car
– Price, interior comfort, mpg, appearance, etc.
Demonstrating AHP Technique
• Identified three potential location alternatives:
A,B, and C
• Identified four criteria: Market, Infrastructure,
Income level, and Transportation,
• 1st level: Goal (select the best location)
• 2nd level: How each of the 4 criteria contributes
to achieving objective
• 3rd level: How each of the locations contributes
to each of the 4 criteria
Demonstrating AHP Technique

• Goal: Choose the best laptop.

• Criteria: Cost, Performance, Battery Life.
• Alternatives: Dell, HP, Lenovo.
• Visual: Table with criteria and
alternatives.
 General Mathematical Process
• Establish preferences at each of the levels
– Determine our preferences for each location
for each criteria
• A might have a better infrastructure over the other
two
– Determine our preferences for the criteria
• which one is the most important
– Combine these two sets of preferences to
mathematically derive a score for each
location
 Pairwise Comparisons
Preference Level Numerical
• Used to score each Value
Equally preferred 1
alternative on a
criterion Equally to moderately 2
preferred
• Compare two Moderately preferred 3
alternatives according
Moderately to strongly 4
to a criterion and preferred
indicate the Strongly preferred 5
preference using a Strongly to very strongly 6
preference scale preferred
• Standard scale used Very strongly preferred 7

in AHP Very strongly to extremely 8

preferred
Extremely preferred 9
 Pairwise Comparison
• If A is compared with B Market
for a criterion and
preference value is 3,
then the preference value location A B C
of comparing B with A is
1/3
A 1 3 2
• Pairwise comparison
ratings for the market
criterion B 1/3 1 1/5
• Any location compared to
itself, must equally
C 1/2 5 1
preferred
 Other Pairwise Comparison
Market Income level
location A B C location A B C
A 1 3 2 A 1 6 1/3
B 1/3 1 1/5 B 1/6 1 1/9
C 1/2 5 1 C 3 9 1

Infrastructure Transportation
location A B C location A B C
A 1 1/3 1 A 1 1/3 1/2
B 3 1 7 B 3 1 4
C 1 1/7 1 C 2 1/4 1
 Developing Preferences within Criteria
• Prioritize the decision Market
alternatives within each location A B C
criterion A 1 3 2

• Referred to synthesization B 1/3 1 1/5

– Sum the values in each C 1/2 5 1

column of the pairwise 11/6 9 16/5
comparison matrices Market
– Divide each value in a column
by its corresponding column location A B C
sum to normalize preference A 6/11 3/9 5/8
values
• Values in each column sum B 2/11 1/9 1/16
to 1 C 3/11 5/9 5/16
– Average the values in each
Market
row
• Provides the most preferred location A B C Average
alternative (A, C, B) A 0.5455 0.333 0.6250 0.5012
• Last column is called B 0.1818 0.1111 0.0625 0.1185
preference vector C 0.2727 0.5556 0.3125 0.3803
 Other Preference Vectors
Location Market Income Level Infrastructure Transportation

A 0.5012 0.2819 0.1780 0.1561

B 0.1185 0.0598 0.6850 0.6196

C 0.3803 0.6583 0.1360 0.2243

 Ranking the Criteria
• Determine the relative

Transportatio
infrastructure
importance or weight of

Income
Market

n
the criteria Criteria
– which one is the most
important and which one is
the least important one Market 1 1/5 3 4
• Accomplished the same
Income 5 1 9 7
way we ranked the
locations within each infrastructure 1/3 1/9 1 2
criterion, using pairwise
Transportation 1/4 1/7 1/2 1
comparison
 Normalizing

Transportation
Infrastructure

Average
Income
Market
Criteria

Market 0.1519 0.1375 0.2222 0.2857 0.1993

Income 0.7595 0.6878 0.6667 0.5000 0.6535

Infrastructure 0.0506 0.0764 0.0741 0.1429 0.0860

Transportation 0.0380 0.0983 0.0370 0.0714 0.0612

Income level is the highest priority criterion followed by market

 Developing Overall Ranking

Income Level

Infrastructure

Transportatio
Location

Market

Average
n
Criteria

A 0.5012 0.2819 0.1780 0.1561

B 0.1185 0.0598 0.6850 0.6196 Market 0.1993

C 0.3803 0.6583 0.1360 0.2243

Income 0.6535

Overall Score A= (0.1993)(0.5012)+(0.6535)(0.2819)+ Infrastructure 0.0860

(0.1780)(0.0860)+(0.1561)(0.0612)
=0.3091 Transportation 0.0612
Overall Score B =0.1595
Overall Score C =0.5314
Preference Vector
 Summary
• Develop a pairwise comparison matrix for each decision
alternative for each criterion
• Synthesization
– Sum values in each column
– Divide each value in each column by the corresponding column
sum
– Average the values in each row (provides preference vector for
decision alternatives)
– Combine the preference vectors
• Develop the preference vector for criteria in the same
way
• Compute an overall score for each decision alternative
• Rank the decision alternatives
 AHP Consistency
• Decision maker uses pairwise comparison to establish the
preferences using the preference scale
• In case of many comparisons, the decision maker may lose
track of previous responses
• Responses have to be valid and consistent from a set of
comparisons to another set
• Suppose for a criterion
– A is “very strongly preferred” to B and A is “moderately preferred”
to C
– C is “equally preferred” to B
– Not consistent with the previous comparisons
• Consistency Index (CI) measures the degree of
inconsistency in the pairwise comparisons
 CI Computation
Pairwise Comparison Matrix

• Consider the pairwise

Transportatio
infrastructure
comparisons for the 4 criteria

Income
Market

n
Criteria
• Multiply the Pairwise Preference
Comparison Matrix by the Vector

Preference Vector Market 1 1/5 3 4 .1993

• Divide each value by the Income 5 1 9 7 .6535
corresponding weights from *
.0860
the preference vector infrastructure 1/3 1/9 1 2

• If the decision maker was a Transportation 1/4 1/7 1/2 1 .0612

perfectly consistent decision

maker, then each of these (1)(0.1993)+ (1/5)(0.6535)+…+(4)(0.0612)=0.8328
ratios would be exactly 4 (5)(0.1993)+ (1)(0.6535)+…+(9)(0.0612)=2.8524
(1/3)(0.1993)+ (1/9)(0.6535)+…+(2)(0.0612)=0.3474
• CI=(4.1564-n)/(n-1), where n (1/4)(0.1993)+ (1/7)(0.6535)+…+(1)(0.0612)=0.2473
is the number of being 0.8328/0.1993=4.1786
compared 2.8524/06535=4.3648
0.3474/.0760=4.0401
0.2473/0.0612=4.0422
Ave =4.1564
 Degree of Consistency
• CI=(4.1564-4)/(4-1)=0.0521
• If CI=0, there would a perfectly
consistent decision maker n 2 3 4 5 6 7 8 9 10

• Determine the inconsistency

degree
RI

0.58

0.90

1.12

1.24

1.32

1.41

1.45

1.51
• Determined by comparing CI
to a Random Index (RI)
• RI values depend on n
• Degree of consistency =CI/RI
• IF CI/RI <0.1, the degree of
consistency is acceptable
• Otherwise AHP is not
meaningful
• CI/RI=0.0521/0.90=0.0580<0.1
 Scoring Model
• Similar to AHP, but mathematically simpler
• Decision criteria are weighted in terms of their
relative importance
• Each decision alternative is graded in terms of
how well it satisfies the criteria using S i=Σgijwj,
where
– Wj=a weight between 0 and 1.00 assigned to criterion
j indicating its relative importance
– gij=a grade between 0 and 100 indicating how well the
decision alternative i satisfies criterion j
– Si=the total score for decision alternative i
 Example
Decision Alternatives
Decision Criteria Weight Alt.1 Alt.2 Alt.3 Alt.4
Criterion 1 0.30 40 60 90 60
Criterion 2 0.25 75 80 65 90
Criterion 3 0.25 60 90 79 85
Criterion 4 0.10 90 100 80 90
Criterion 5 0.10 80 30 50 70

Weight assigned to each criterion indicates its relative importance

Grades assigned to each alternative indicate how well it satisfies each criterion
(0.3)(40)+ (0.25)(75)+…+(0.10)(80)=62.75
Si=Σgijwj= (0.3)(60)+ (0.25)(80)+…+(0.10)(30)=73.50
(0.3)(90)+ (0.25)(65)+…+(0.10)(50)=76.00
(0.3)(60)+ (0.25)(90)+…+(0.10)(70)=77.75
 Example
• Purchasing a mountain bike II-Gear Action
• Three criteria: price, gear Bike A B C
action, weight/durability A 1 1/3 1/7
• Three types of bikes: A,B,C B 3 1 1/4
• Developed pairwise C 7 4 1
comparison matrices I,II,III
• Ranked the decision criteria III-Weight/Durability
based on the pairwise
Bike A B C
comparison
• Select the best bike using A 1 3 1
AHP
B 1/3 1 1/2

C 1 2 1

I-Price
Criteria Price Gear Weight
Bike A B C
Price 1 3 5
A 1 3 6
B 1/3 1 2 Gear 1/3 1 2
C 1/6 2 1 Weight 1/5 1/2 1
 Advantages of AHP

• Combines qualitative and quantitative factors.

• Easy to visualize with hierarchies.
• Consistency checks reduce bias.
 Limitations of AHP

• Time-consuming for large hierarchies.

• Subjective pairwise comparisons.
• Requires expertise to apply correctly.
 Real-World Applications

• Healthcare: Prioritizing patient treatments.

• Supply Chain: Selecting suppliers.
• Engineering: Evaluating project risks.
Visual: Use icons or stock images.