Prosiding INSAHP5

Semarang, 14 Mei 2008

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ISBN : 978-979-97571-4-2

The Analytic Hierarchy Process vs

The Analytic Network Process
Kirti Peniwati
PPM Graduate School of Management
Contact Person :
e-mail : kirti@indo.net.id

1. INTRODUCTION
This paper is a presentation of selected materials from the works of Dr. Thomas L. Saaty to
highlight the similarities and differences of the Analytic Hierarchy Process (AHP) and the
Analytic Network Process (ANP). Some examples in prediction and estimation are included to
illustrate ANP. It is assumed that the readers are familiar with the basics of AHP.
2. THE SEVEN PILLARS OF THE AHP
Dr. Saaty presented his paper titled "The Seven Pillars of the Analytic Hierarchy Process" at the
Second International Symposium on the Analytic Hierarchy Process (1999) in Pittsburgh. He
described the seven pillars as follows:
a. Ratio scales.
Ratio scales (normalized) are central to the generation and synthesis of priorities in any
multicriteria method. In addition, ratio scales are the only way to generalize a decision theory to
the case of dependence and feedback. Ratio scales can also be used to make decisions involving
several hierarchies such as in selecting strategies based on benefits, costs, opportunities, and
risks.
b. Reciprocal paired comparisons.
Priorities of the alternatives are derived from the set of pairwise comparison judgments. There
are at least three modes for arriving at a ranking of the alternatives:
Relative, which ranks a few alternatives by comparing them in pairs with respect to a
common property.
Absolute, which rates an unlimited number of alternatives one at a time on intensity scale
constructed separately for each covering criterion.
Benchmarking, which ranks alternatives by including a known alternative in the group and
comparing the other against it.
c. Conditions for sensitivity of the principal right eigenvector to changes in judgments.
Sensitivity of the eigenvector to perturbation in judgments limits the number of elements in each
set of comparisons to a few and requires that they be homogeneous. The comparisons must be by
selecting the small element as a unit and ask how much more the larger element is.
d. Homogeneity and clustering.
Clustering is used, when the difference of the elements are more than one order of magnitude, to
extend the fundamental scale gradually, eventually enlarging the scale from 1-9 to 1-.
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Kirti Peniwati

e. Synthesis that can be extended to dependence and feedback.

Synthesis is applied to the derived ratio scales to create a uni-dimensional ratio scale for
representing the overall outcome, by using additive weighting.
f. Rank preservation and reversal.
Rank preservation and reversal can be shown to occur without adding or deleting criteria. This
leaves no doubt that rank reversal is as intrinsic to decision making as rank preservation also is.
The AHP's distributive mode allows rank reversal while the ideal mode preserves rank in both
absolute and relative measurement.
g. Group judgments.
Group judgments must be integrated carefully and mathematically. With the AHP, it is possible
to take into consideration the experience, knowledge, and power of each person involved. There
is no need to force consensus or to use voting.
3. HIERARCHY AND NETWORK SYSTEMS
ANP is a general theory with AHP as its special case. A holarchy is a hierarchy with feedback
from the bottom to the top level, another special form of ANP. The ANP is generalized further to
multiple networks, a structure commonly used to represent a benefits-opportunities-costs-risks
(BOCR) choice problem as a single model. A control hierarchy of strategic criteria is used to rate
benefits, opportunities, costs, and risks.
A hierarchy is a linear structure in which influence is distributed from the top down as shown in
Figure 1 below.

Linear Hierarchy
Goal
Criteria
component,
cluster
(Level)

Subcriteria

element
Alternatives
A loop indicates that each
element depends only on itself.

Figure 1 A Hierarchic Structure of Components and Elements

The elements of a decision problem are assigned to levels depending on their concreteness,
controllability and certainty. Ordinarily the narrower and more concrete are the properties the
lower down is the level to which they belong. The less concrete and more general, less
controllable, more uncertain and risky are the properties or elements, the higher up is the level to
which they belong. In a hierarchy the elements in each level are influenced or controlled by the
elements in the level immediately above. Influence is distributed downwards from the top, with
the goal having the greatest influence or importance. It has a value of one. This value of one is
divided among the elements of the second level, and the values of each of these in turn is divided
among those of the third level, and so on down to the level of alternatives of the decision at the
bottom.
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The Analytic Hierarchy Process vs The Analytic Network Process

There is a more general way to structure a decision problem involving functional dependence. It
consists of components which in turn consist of elements and feedback is allowed between
components. A hierarchy is a special case of such a network. In both hierarchies and networks the
elements in a component may be dependent on each other. Figure 2 below shows the structure of
a network. In this figure, a loop means that there is inner dependence of elements within a
component.

Arc from component

C4 to C2 indicates the
outer dependence of the
elements in C2 on the
elements in C4 with respect
to a common property.

C4
C1

C2

Feedback
A cycle between C
2 and C3

C3
A loop in a component indicates inner dependence of the elements in that
component with respect to a common property.

Figure 2 Feedback Network with components having

Inner and Outer Dependence among Their Elements

4. STRUCTURING A DECISION PROBLEM

Suggestions for learning to structure a decision problem are:1) Do a simple problem; 2) Look at
examples [Saaty; ; 3) Look at the two typical hierarchic forms used in planning ; 4) Define the
overall objective - what question are you trying to answer- 5) Examine your problem as part of
several problems under an overall goal; 6) Force a framework. Work from the top down and from
the bottom up; 7) Brainstorm the problem by listing every conceivable factor. Organize your ideas
hierarchically from the general to the particular; 8) Make certain that you can answer questions
about the importance of the elements in a level with respect to the elements in the level above; 9)
Formulate written questions you are going to answer in making paired comparisons for each level.
In the nonlinear network diagram or system with feedback, there are two kinds of dependence:
that between components, but in a way which allows for feedback circuits; and the other, the
interdependence within a component, in a way which allows feedback loops. We have called
these loops respectively outer and inner dependence as shown in Figure 3 below.

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Kirti Peniwati

In te rm e diate
c om p o ne nt
(Tra ns ien t S ta te)

S ou rc e C om po ne nt

C1

C2

O ute rd e pe nd e nc e

Inte rm ed iate
C o m p on en t
(R e cu rre nt S ta te )

S in k C o m p on e nt
(Ab so rbing S ta te )

C3

C5

In te rm e diate
C om p o ne nt
(R e cu rre n t S ta te)
In ne r d e pe nd e nc e lo op

C4
Figure 3 Connections in a Network

If the criteria or attributes in a hierarchy cannot be compared with respect to an overall objective
because of lack of information about them, they can instead be compared in terms of the
alternatives in the level below them by examining each alternative and asking which criterion or
attribute is perceived to be more important for the overall integrity well being or behavior of that
alternative. The alternatives would naturally be also compared in terms of each attribute as is
normally done. The result is a system of two interdependent components.
A holarchy, illustrated in Figure 4 is a hierarchy of two or more levels in which the goal is
eliminated and what was the second level that used to depend on the goal, now depends on the
bottom level of alternatives, thus as a whole the hierarchy is a cycle of successively dependent
levels. We have encountered such a form in the analysis of the turn around of the US economy in
which the importance of the primary factors is determined in terms of the time periods.

Figure 4 The U.S. Holarchy of Factors for Forecasting Turnaround in Economic Stagnation
The structure of a multiple networks is shown in Figure 5 below.

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The Analytic Hierarchy Process vs The Analytic Network Process

Goal
(Control
Hierarchy)

Strategic Criteria

BOCR Rating

ANP model
Of Costs

ANP model
Of Opportunities

ANP model
Of Benefits

ANP model
Of Risks

Figure 5 Multilevel ANP

5. SUPERMATRIX OF ANP
With AHP judgments are presented in a set of matrices, from each an eigenvector is derived to
obtain a set of local priority scales. The outcome (priority of the alternatives) is obtained by
systematic synthesizing the set of eigenvectors from the top down the hierarchy. ANP uses a
supermatrix of eigenvectors as shown in Figure 6, of which AHP has its special form as shown in
Figure 7.
C1
e11e12
C1

e11
e12

e1n

W=

C2

CN

e1n

e21e22

CN
e2n

eN1eN2

eNn

W11

W12

W1N

W21

W22

W2N

WN1

WN2

WNN

e21
e22

e2n

C2

eN1
eN2
eNn

Figure 6 The Supermatrix of a Network

0 0 K
0

0 0 K

0
W 21
0 W 32 0 K

0
W=
M M M
M
M
M

K W n-1, n-2

0 0 K
W n,n-1
0
Figure 7 The Structure and Supermatrix of Hierarchy
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0
0
0

Kirti Peniwati

6. COMPLEXITY OF MODEL VS ACCURACY OF OUTCOME

Predicting market share is a way to validate ANP. With valid judgments provided by
knowledgeable individuals or group, it has been shown by many examples that ANP is useful for
market share estimation. Figure 8 shows clusters of an ANP model for estimating market share in
the hamburger industry. The elements are not shown here, but the competitor cluster contains
three elements representing the alternatives, i.e., McDonalds, Burger King, and Wendys.

Marketing Mix
Competitors
Customer Group

Contemporary
Issues

Time
Horizon

Indirect
Competitors

Traits
Public Health

Figure 8 Market Share in the Hamburger Industry

Figure 9 shows the outcomes of the same market share estimation using three different structures.
ANP gives the most accurate outcome.
Market
Share
McDonald
Burger King
Wendys

Simple
Hierarchy

Complex
Hierarchy

Network

Actual

0.4640
0.2305
0.3055

0.5427
0.2689
0.1884

0.5603
0.2778
0.1621

0.5823
0.2857
0.1320

Figure 9 Predicting Market Share:

complexity of model vs accuracy of outcome

7. ANOTHER TWO ESTIMATION EXAMPLES WITH ANP

Figure 10 below is the same ANP model for the holarchy in Figure 4. The model indicated that
the recovery would occur 8.54 months from the time of the forecasting exercise on April 7, 2001,
or around mid to late December, 2001; that is to say, toward the end of the fourth quarter of 2001.
Here is what the Wall Street Journal July 18, 2003 wrote about the subject more than two years
after: The National Bureau of Economic Research said the U.S. economic recession that began in
March 2001 ended eight months later, not long after the Sept. 11 terrorist attacks

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The Analytic Hierarchy Process vs The Analytic Network Process

Figure 10 Forecasting US Economy Recovery

(a holarchy model)

Figure 11 below is an ANP model of predicting market share of airlines, which also produced a
close estimation of the actual market share as shown in Figure 12. Notice that the model uses
internal elements which can be observed and experienced directly by their customers. This is
usually true for such models with ANP.

Figure 11 Predicting Market Share of Airlines

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Kirti Peniwati

Airlines
American
United
Delta
Northwest
Continental
US Airways
Southwest
American West

Actual (yr 2000)

Model Estimate

23.9
18.7
18.0
11.4
9.3
7.5
5.9
4.4

24.0
19.7
18.0
12.4
10.0
7.1
6.4
2.9

Figure 12 Market Share of Airlines: estimation vs actual

8. IMPORTANT NOTES WITH ANP

There are a number of important notes for using ANP:
a.
No multiple goal clusters;
One must not have more than one goal clusters because goals are source components
(dominate but not being dominated by other clusters).
b.
Clusters must be compared;
Intensity of feedback depends on the relative importance between the dominating and the
dominated elements. Mathematically, a supermatrix must be stochastic for it to converge
when it is multiplied many times to get the final outcome.
c.
Network must always show links to the alternative cluster;
Alternative cluster is a sink component, hence must be connected to all the other clusters
for the judgments of dominance to affect the final outcome.
d.
The negative outcome of the multiple networks BOCR model is acceptable (additive
syntheses).
BOOKS AND WEBSITES
Dr Saatys recent and updated books on AHP/ANP are:
[1] Group Decision Making: Drawing out and Reconciling Differences (with Kirti Peniwati), 2008.
[2] Decision Making with the Analytic Network Process: Economic, Political, Social and
Technological Applications with Benefits, Opportunities, Costs and Risks (with Luis G. Vargas),
2006.
[3] Theory and Applications of the Analytic Network Process, 2005.
[4] The Encyclon: a Dictionary of ANP Applications (with M. Ozdemir), 2005.
[5] Fundamentals of Decision Making with the Analytic Hierarchy Process, 2000.
[6] The Hierarchon: a Dictionary of Hierarchies (with E.H. Forman), 1993.
[7] Analytical Planning: the Organization of Systems (with K. Kearns), 1991.

[1]
[2]
[3]
[4]

Websites to visit for information and ANP softwares are:

www.decisionlens.com
www.saaty.com
www.creativedecisions.net
www.rwspublications.com

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