Analytic Hierarchy Process

Dr. Golda Word Komanapalli

 Analytic Hierarchy Process
• Developed by Thomas L Saaty in 1980
• Interpretation of an Objective analysis is
always subjective
• Use “Judgements” to derive tangible values
• Decision making involving value judgements
 The Process
• AHP is a multi-criteria decision making
method that helps decision makers deal with
decisions that may contain multiple conflicting
and subjective criteria. It can accommodate
the views of a number of decision makers and
the trade-off of their objectives.
• It relies on the establishment of a decision
hierarchy.
 The Process
• The first stage of the AHP process is to define the hierarchy;

• The next step is to establish priorities among the elements by making

pair-wise comparisons of the criteria and alternatives for each criteria.

• Then the comparison data is converted into weights.

– Given that there is one goal, m criteria and n alternatives, the analysis will yield a
single (m x m) matrix for the criteria, and m (n x n) matrices for the alternatives.

• Finally, if we know particular values for the alternatives, we can use the
weights to obtain a score for each sub-criterion, and then each criteria
and finally the overall objective. Changing the values of the alternatives
will change the objective score so different alternatives can be
compared.
Example of Decision Hierarchy
Primary objective

Criterion 1 Criterion 2

Sub-criterion 1a Sub-criterion 1b Sub-criterion 1c Sub-criterion 2a Sub-criterion 2b

Alternative A Alternative B Alternative C

 Assign Values to the Criteria
Intensity of Definition
Importance
1 Equal Importance
3 Somewhat more important
5 Much more important
7 Very much more important
9 Absolutely more important
2,4,6,8 Intermediate values
Explanation
Two Factors contribute equally to the objective
Experience and judgement slightly favour one
over the other
Experience and judgement strongly favour one
over the other.
Experience and judgement strongly favour one
over the other. Its importance is demonstrated in
practice
The evidence favouring one over the other is of
the highest possible validity
When compromise is needed
 Worked Out Example

• Step 1: Assign Values to the factors

– The firm has four factors in mind: expense,
operability, reliability and flexibility; E, O, R and F
respectively.
– The firm would prefer not to spend too much
money but is willing to do so if the results justify it.
 Step 2: Pairwise Comparisons
  E O R F
The principal diagonal contains entries E 1      
of 1, as each factor is as important as O   1    
itself. R     1  
F       1

Operability, O, is slightly more important than cost,

E. This is represented in the following matrix that is
  E O R F rated as 3 in the cell O, E and 1/3 in E, O.
E 1 1/3 5 1  
O 3 1 5 1 Cost, E, is far more important than reliability, R. This
R 1/5 1/5 1 1/5 is represented in the matrix by giving 5 in E, R and
1/5 in R, E.
F 1 1 5 1
 
Similarly, Operability, O, is much more important
than flexibility, F.
Step 3: Calculating Eigen Vector
• Relative Value Vector (RVV)   0.2 58

• The highest value of the Eigen

( )
0. 383
0.0 59
0. 298

vector indicates the most preferred

• Operability is the most required
factor in choosing the product
 How to Calculate Eigen Vector
• Square the value matrix
E O R F
E 1 0.333 5 1 4 2.667 15.333 3.333
O 3 1 1 1 7.2 3.2 22 5.2
R 0.2 0.2 1 0.2 1.2 0.667 3.2 0.8
F 1 1 5 1
6 3.333 16 4

25.333 0.258
• Add the rows and 37.600 0.383
5.867 0.060
divide by the totals 29.333 0.299
Eigen
98.133 Vector
 Eigen Vectors and Consistency Ratio
•  Step 4: Calculate Consistency Index/Ratio:
– CR for the above table is 0.055, which is below
0.1 and hence these are consistent choices.
• To calculate Consistency Index
– Multiply Value Matrix by Eigen Vector
– Divide each value by the corresponding Eigen
value
– The average of the Eigen values is our estimate
 
 Calculating CR
• Saaty
  Has provided a table of Consistency
Index for random samples according to the
matrix size.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
0.00 0.00 0.58 0.90 1.12 1.24 1.32 1.41 1.45 1.49 1.51 1.48 1.56 1.57 1.59

CR =
 Step 5: Eigen Vector for Each
Product
• Step 5: Calculate Eigen Vector for Each
Product
– The following table is with respect to E, Expense
  X Y Z  Eigen Vector = ,
X 1 5 9
Y 1/5 1 3
Z 1/9 1/3 1 Critical Ratio: 0.072
 Product vs. Criteria Matrix
Operability Flexibility
Eigen
  Vector = ,
  X Y Z
  X Y Z Critical Ratio: 0.026
X 1 1 5 X 1 1/9 1/5
Y 1 1 3 Y 9 1 2
Z 1/5 1/3 1 Z 5 1/2 1

Eigen
  Vector = ,
Reliability
Eigen
  Vector = , Critical Ratio: 0.0
  X Y Z
(Perfect Consistency)
X 1 1/3 1/9
Critical Ratio: 0.0
Y 3 1 1/3 (Perfect Consistency)
Z 9 3 1
 Final Step: Multiply Eigen Vectors

• Eigen Vectors for all the Products (Performance

Vector)
  E O R F
X 0.751 0.48 0.077 0.066
Y 0.178 0.406 0.231 0.615
Z 0.071 0.114 0.692 0.319

• Eigen Vector for Product Requirements E 0.258

O 0.383
(Requirement Vector) R 0.060
F 0.299
 Final Eigen Vector – Decision Vector

• Multiplying these two Matrices we get our Final Decision

Eigen Vector
  𝟎 . 𝟒𝟎𝟏
( 𝟎 . 𝟑𝟗𝟗
𝟎 . 𝟎𝟏𝟗 )
• Interpretation - Decision Options
 
– Y seem to meet the firm’s needs. There is only slight difference
between X and Y. Therefore choosing X would be ideal, in terms of
cash flow
 
– Z is well behind at 0.019 and would do rather badly at satisfying the
firm's requirements in this illustrative case.