Lecture 5

ANALYTIC HIERARCHY PROCESS

(AHP)

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AHP Process

The analytic hierarchy process (AHP), developed by Thomas L. Saaty,1 is designed to

solve complex multi-criteria decision problems. AHP requires the decision maker to
provide judgments about the relative importance of each criterion and then specify a
preference for each decision alternative using each criterion. The output of AHP is a
prioritized ranking of the decision alternatives based on the overall preferences
expressed by the decision
maker.
To introduce AHP, we consider a car purchasing decision problem faced by Diane
Payne.

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Data regarding the Price and MPG are provided in Table 14.4. However, measures of
Comfort and Style cannot be specified so directly. Diane will need to consider factors
such as the car’s interior, type of audio system, ease of entry, seat adjustments, and driver
visibility in order to determine the comfort level of each car. The style criterion will have
to be based on Diane’s subjective evaluation of the color and the general appearance of
each car.

An advantage of AHP is that it can handle situations in which the unique subjective
judgments of the individual decision maker constitute an important part of the
decision-making process.

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AHP
Steps

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 1. Developing the Hierarchy

The first step in AHP is to develop a graphical representation of the problem in terms
of the overall goal, the criteria to be used, and the decision alternatives. Such a graph
depicts the hierarchy for the problem. Figure 14.6 shows the hierarchy for the car
selection problem.

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2. ESTABLISHING PRIORITIES USING AHP

Showing how AHP uses pairwise comparisons expressed by the decision maker to
establish priorities for the criteria and priorities for the decision alternatives based on
each criterion.

In the following discussion we demonstrate how to establish priorities for the four
criteria in terms of how each contributes to the overall goal of selecting the best car. The
priorities of the three cars using each criterion can be determined similarly.

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3. Pairwise Comparisons

AHP uses a scale with values from 1 to 9. Table 14.5 shows how the decision
maker’s verbal description of the relative importance between the two criteria is
converted into a numerical rating.

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Pairwise comparisons form the fundamental building blocks of AHP. In establishing the
priorities for the four criteria, AHP will require Diane to state how important each
criterion is relative to each other criterion when the criteria are compared two at a time
(pairwise).

That is, with the four criteria (Price, MPG, Comfort, and Style) Diane must make the
following pairwise comparisons:

In each comparison, Diane must select the more important criterion and then
express a judgment of how much more important the selected criterion is.

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In the car selection example, suppose that Diane states that Price is “moderately more
important” than MPG. In this case, a numerical rating of 3
is assigned to the Price-MPG pairwise comparison. From Table 14.5, we see “strongly
more important” receives a numerical rating of 5, whereas “very strongly more
important” receives a numerical rating of 7. Intermediate judgments such as “strongly to
very strongly more important” are possible and would receive a numerical rating of 6.

Table 14.6 provides a summary of the six pairwise comparisons Diane provided for the
car selection problem. Using the information in this table, Diane has specified that

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4. Pairwise Comparison Matrix

To determine the priorities for the four criteria, we need to construct a matrix of the
pairwise comparison ratings provided in Table 14.6. Using the four criteria, the
pairwise comparison matrix will consist of four rows and four columns as shown
here:

Each of the numerical ratings in Table 14.6 must be entered into the pairwise
comparison matrix.

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As an illustration of this process consider the numerical rating of 3 for the Price-
MPG pairwise comparison. Table 14.6 shows that for this pairwise comparison
that Price is the most important criterion. Thus, we must enter a 3 into the row
labeled Price and the column labeled MPG in the pairwise comparison matrix.

In general, the entries in the column labeled Most Important Criterion in Table
14.6 indicate which row of the pairwise comparison matrix the numerical rating
must be placed in.

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Because the diagonal elements are comparing each criterion to itself, the diagonal
elements of the pairwise comparison matrix are always equal to 1. For example, if Price is
compared to Price, the verbal judgment would be “equally important” with a rating of 1;
thus, a 1 would be placed into the row labeled Price and into the column labeled Price in
the pairwise comparison matrix.

All that remains is to complete the entries for the remaining cells of the matrix.
To illustrate how these values are obtained, consider the numerical rating of 3 for
the Price- MPG pairwise comparison.

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This rating implies that the MPG-Price pairwise comparison should have a rating of 1⁄3.
That is, because Diane already indicated Price is moderately more important than MPG
(a rating of 3), we can infer that a pairwise comparison of MPG relative to Price should
be 1⁄3. Similarly, because the Comfort-MPG pairwise comparison has a rating of 4, the
MPG-Comfort pairwise comparison would be 1⁄4. Thus, the complete pairwise
comparison matrix for the car selection criteria is as follows:

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5. Synthesization

Using the pairwise comparison matrix, we can now calculate the priority of each
criterion in terms of its contribution to the overall goal of selecting the best car. This
aspect of AHP is referred to as synthesization.

The following three-step procedure provides a good approximation of the

synthesization results:

To show how the synthesization process works, we carry out this three-step
procedure for the criteria pairwise comparison matrix.

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Step 1. Sum the values in each column.

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Step 2. Divide each element of the matrix by its column total.

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 Step 3. Average the elements in each row to determine the priority of each
criterion.

The AHP synthesization procedure provides the priority of each criterion in terms
of its contribution to the overall goal of selecting the best car.

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 6. Consistency

• An important consideration in this process is the consistency of the pairwise

judgments provided by the decision maker. For example, if criterion A
compared to criterion B has a numerical rating of 3 and if criterion B
compared to criterion C has a numerical rating of 2, perfect consistency of
criterion A compared to criterion C would have a numerical rating of 3*2 = 6.
If the A to C numerical rating assigned by the decision maker was 4 or 5,
some inconsistency would exist among the pairwise comparison.

• AHP provides a measure of the consistency for the pairwise comparisons by

computing a consistency ratio. This ratio is designed in such a way that a
value greater than 0.10 indicates an inconsistency in the pairwise judgments.
Thus, if the consistency ratio is 0.10 or less, the consistency of the pairwise
comparisons is considered reasonable, and the AHP process can continue with
the synthesization computations.

The step-by-step procedure for estimating the consistency ratio for the criteria
of the car selection problem follows:
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As mentioned previously, a consistency ratio of 0.10 or less is considered
acceptable. Because the pairwise comparisons for the car selection criteria show CR
0.068, we can conclude that the degree of consistency in the pairwise comparisons is
acceptable.

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Other Pairwise Comparisons for the Car Selection Problem

Continuing with the AHP analysis of the car selection problem, we need to use the
pairwise comparison procedure to determine the priorities for the three cars using
each of the criteria:
Price, MPG, Comfort, and Style. Determining these priorities requires Diane to
express pairwise comparison preferences for the cars using each criterion one at a
time. For example, using the Price criterion, Diane must make the following
pairwise comparisons:

In each comparison, Diane must select the more preferred car and then express a
judgment of how much more preferred the selected car is.

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Table 14.7 shows how AHP uses Diane’s verbal description of the preference
between the Accord and Saturn to determine a numerical rating of the preference. For
example, suppose that Diane states that based on Price, the Saturn is “moderately more
preferred” to the Accord. Thus, using the Price criterion, a numerical rating of 3 is
assigned to the Saturn row and Accord column of the pairwise comparison matrix.

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Table 14.8 shows the summary of the car pairwise comparisons that Diane provided for
each criterion of the car selection problem. Using this table and referring to selected
pairwise comparison entries, we see that Diane stated the following preferences:

Using the pairwise comparison matrixes in Table 14.8, many other insights may be
gained about the preferences Diana expressed for the cars. However, at this point AHP
continues by synthesizing each of the four pairwise comparison matrixes in Table 14.8
in order to determine the priority of each car using each criterion. A synthesization is
conducted for each pairwise comparison matrix, using the three-step procedure
described previously for the criteria pairwise comparison matrix

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Four synthesization computations provide the four sets of priorities as
shown in figure 14.9

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Using this table, we see that:
Cavalier is the preferred alternative based on Price (0.557),
the Cavalier is the preferred alternative based on MPG (0.639),
the Accord is the preferred alternative based on Comfort (0.593),
and the Saturn is the preferred alternative based on Style (0.656).

At this point, NO CAR IS THE CLEAR, OVERALL BEST.

The next section shows how to combine the priorities for the criteria and the
priorities in Table 14.9 to develop an overall priority ranking for the three cars.

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USING AHP TO DEVELOP AN OVERALL PRIORITY RANKING\

We now want to use these priorities and the priorities shown in Table 14.9 to develop an
overall priority ranking for the three cars.

The procedure used to compute the overall priority is to weight each car’s priority
shown in Table 14.9 by the corresponding criterion priority. For example, the Price
criterion has a priority of 0.398, and the Accord has a priority of 0.123 in terms of the
Price criterion.

Thus, 0.398 0.123 0.049 is the priority value of the Accord based on the Price
criterion. To obtain the overall priority of the Accord, we need to make similar
computations for the MPG, Comfort, and Style criteria and then add the values to
obtain the overall priority.

This calculation is as follows (in next slide):

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 Solve problems
Problem 1

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Problem 2

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 Conclusion
• Complete tasks assigned in goal programming
and AHP
• Thoroughly read chapter and solve problems
assigned

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