Analytic Hierarchy Process (AHP)

Structured technique for organizing and analyzing complex

decisions.

It was developed by Thomas L. Saaty in the 1970s and has been

extensively studied and refined since then.

It has particular application in group decision making, and is used

around the world in a wide variety of decision situations, in fields
such as government, business, industry, healthcare, and education.

Selecting an alternative from a set of alternatives

or Ranking alternatives
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 Analytical Hierarchy Process
Designed to solve multi-criteria decision problems

Model under conditions of certainty where we

know all of the info but we need to trade-off
many factors.

We are comparing several alternatives on the

basis of the same set of attributes.

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 AHP - Steps
1. Develop model hierarchy
2. Make pair-wise comparisons
3. Synthesize judgments
4. Check for consistency
Synthesize the process of calculating the priority of each
criterion in terms of its contribution to the overall goal of
achieving your goal

Step 1: Sum values in each column of pair-wise

comparison matrix
Step 2: Divide each element by its column total (gives
normalized pair-wise comparison matrix)
Step 3: Compute average of elements in each row (gives
estimate of relative priorities of elements being
compared)

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 1. Develop model Hierarchy
Develop a visual representation of the problem in terms of
the overall goal, the criteria to be used and the decision
alternatives

http://en.wikipedia.org/wiki/Analytic_hier
archy_process

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 Example: Car Selection Problem

Hierarchy for the Car Selection Problem

Overall Goal To buy a Car that fits my preferences

Criteria Cost Reliability Fuel Economy

Decision i10 Ritz Figo

Alternatives

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 2. Make Pairwise Comparisons &
3. Synthesize judgment
Preference Scale for the Pair-wise Comparisons

Extremely
Equal Moderate Strong Very Strong Preferred

1 3 5 7 9 6
 Forming the Pair-wise Comparison Matrix for Cost

Ritz is moderately preferred to i10, i10 in the Ritz row is 3 and Ritz entry in the
i10 row is 1/3.

Ritz is very strongly preferred to Figo, Figo's entry in the Ritz row is 7 and Ritz's
entry in the Figo row is 1/7.

i10 is strongly to very strongly preferred to Figo, Figo's entry in the i10 row is 6
and i10's entry in the Figo row is 1/6.

Pairwise Comparison Matrix for Cost

i10 Ritz Figo

i10 1 1/3 6
Ritz 3 1 7
Figo 1/6 1/7 1

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 Normalized Matrix for Cost
Divide each entry in the pair-wise comparison matrix by
its corresponding column sum. For example, for i10, the
column sum = 1 + 3 + 1/6 = 25/6. This gives:

i10 Ritz Figo

i10 6/25 7/31 6/14

Ritz 18/25 21/31 7/14
Figo 1/25 3/31 1/14

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 Priority Vector For Cost
The priority vector is determined by averaging
the row entries in the normalized matrix. Converting
to decimals we get:

i10: ( 6/25 + 7/31 + 6/14)/3 = .298

Ritz: (18/25 + 21/31 + 7/14)/3 = .632
Figo: ( 1/25 + 3/31 + 1/14)/3 = .069

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 Forming the Pair-wise Comparison Matrix for Reliability

It is determined that for reliability of i10 is very

strongly preferable to Ritz and equally to moderately
preferable to Figo. Also, Ritz is strongly preferable to Figo.

Pairwise Comparison Matrix for Reliability

i10 Ritz Figo

i10 1 7 2
Ritz 1/7 1 5
Figo 1/2 1/5 1

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 Normalized Matrix for Reliability
Divide each entry in the pairwise comparison
matrix by its corresponding column sum. For example,
for i10 the column sum = 1 + 1/7 + 1/2 = 23/14. This
gives:
i10 Ritz Figo

i10 14/23 35/41 2/8

Ritz 2/23 5/41 5/8
Figo 7/23 1/41 1/8

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 Priority Vector For Reliability
The priority vector is determined by averaging the
row entries in the normalized matrix. Converting to
decimals we get:

i10: (14/23 + 35/41 + 2/8)/3 = .571

Ritz: ( 2/23 + 5/41 + 5/8)/3 = .278
Figo: ( 7/23 + 1/41 + 1/8)/3 = .151

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 Forming the Pair-wise Comparison Matrix for Fuel Economy
It is determined that for Fuel Economy, i10 is equally
preferable to Figo. Both i10 and Figo are very strongly
to extremely preferable to Ritz.

Pairwise Comparison Matrix for Fuel Economy

i10 Ritz Figo

i10 1 8 1
Ritz 1/8 1 1/8
Figo 1 8 1

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 Normalized Matrix for Fuel Economy
Divide each entry in the pairwise comparison
matrix by its corresponding column sum.

i10 Ritz Figo

i10 8/17 8/17 8/17

Ritz 1/17 1/17 1/17
Figo 8/17 8/17 8/17

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 Priority Vector For Fuel Economy
The priority vector is determined by averaging the
row entries in the normalized matrix. Converting to
decimals we get:

i10: (8/17 + 8/17 + 8/17)/3 = .471

Ritz: (1/17 + 1/17 + 1/17)/3 = .059
Figo: (8/17 + 8/17 + 8/17)/3 = .471

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 Forming the Pair-wise Comparison Matrix for Criteria

It is determined that in terms of criteria, cost is

extremely preferable to Fuel Economy and very
strongly preferable to reliability, and that reliability is
very strongly preferable to Fuel Economy.

Pairwise Comparison Matrix for Criteria

Cost Reliability Fuel Eco.

Cost 1 7 9
Reliability 1/7 1 7
Fuel Eco. 1/9 1/7 1

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 Normalized Matrix for Criteria
Divide each entry in the pair-wise comparison
matrix by its corresponding column sum.

Cost Reliability Fuel Eco.

Cost 63/79 49/57 9/17

Reliability 9/79 7/57 7/17
Fuel Eco. 7/79 1/57 1/17

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 Priority Vector For Criteria
The priority vector is determined by averaging the
row entries in the normalized matrix. Converting to
decimals we get:

Cost: (63/79 + 49/57 + 9/17)/3 = .729

Reliability: ( 9/79 + 7/57 + 7/17)/3 = .216
Fuel Eco.: ( 7/79 + 1/57 + 1/17)/3 = .055

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 Overall Priority Vector
The overall priorities are determined by multiplying the
priority vector of the criteria by the priorities for each decision
alternative for each objective.

Priority Vector
for Criteria [ .729 .216 .055 ]

Cost Reliability Fuel Eco.

i10 .298 .571 .471
Ritz .632 .278 .059
Figo .069 .151 .471

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 Overall Priority Vector (continued)
Thus, the overall priority vector is:

i10: (.729)(.298) + (.216)(.571) + (.055)(.471) = .366

Ritz: (.729)(.632) + (.216)(.278) + (.055)(.059) = .524
Figo: (.729)(.069) + (.216)(.151) + (.055)(.471) = .109

Ritz appears to be the overall recommendation.

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 4. Check for Consistency
A key step in the making of several pair-wise comparisons is
considering the consistency of the pair-wise judgment.
Example: If A compared to B = 3 and B compared to C = 2 then
A compared to C should = 3x2 = 6. If it wasnt, some
inconsistency would occur.

This type of inconsistency increases as the number of pair-wise

comparison increases.

Certain level of inconsistencies are expected; however, if the

amount inconsistencies is too high, then the results of AHP is
questionable.

With AHP, we can measure the degree of consistency; and if

unacceptable, we can revise pair-wise comparisons
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Checking Consistency
Inconsistencies are measured by Consistency Index (CI) or
Consistency Ratio (CR)

CR = CI / RI
(RI is Random Index, this is the consistency index of a randomly
generated pair-wise comparison matrix. If CR > 0.1, then there
may be serious inconsistencies in the pair-wise comparison.)

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 Checking Consistency for Cost
Multiply pair-wise comparison matrix by its
priority:

1 1/3 6 .298 .923

3 1 7 .632 = 2.009
1/6 1/7 1 .069 .209

Divide these number by their priorities to get:

.923/.298 = 3.097
2.009/.632 = 3.179
.209/.069 = 3.029

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 Checking Consistency
Average the above results to get max.
max = (3.097 + 3.179 + 3.029)/3 = 3.102
Compute the consistence index, CI, for two terms.
CI = (max - n)/(n - 1) = (3.102 - 3)/2 = .051
Compute the consistency ratio, CR, by CI/RI,
where RI = .58 for 3 factors:
CR = CI/RI = .051/.58 = .088
Since the consistency ratio, CR, is less than .10, this is
well within the acceptable range for consistency.
Random Index Values for the Comparison of n items

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AHP with Spreadsheets

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Super Decisions Software for Decision-Making

The Super Decisions software

implements the Analytic
Network Process developed
by Dr. Thomas Saaty. The
program was written by the
ANP Team, working for
the Creative Decisions
Foundation.

Creative Decisions Foundation 4922 Ellsworth

Avenue Pittsburgh, PA 15213 USA e-mail:
support@superdecisions.com

http://www.superdecisions.com/
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Scoring Models

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 Scoring Models
Scoring Model

A subjective multi-criteria method in which the decision maker

assigns weights to each criterion based on the importance of the
criterion and then assigns a rating for each decision alternative
on each criterion.

Model outcomes are the sum of the products of the criteria

weight with the respective ratings of criteria for that decision
alternative.

Areas of application
Facility location
Product selection

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Product Selection Problem:

Factor weight
interpretation table
Importance Weight
Very importance 5
Somewhat Importance 4
Average Importance 3
Somewhat 2
unimportance

Very unimportance 1 30
 Decision Alternative Rating
Interpretation Table
Level of satisfaction Rating
Extremely high 9
Very high 8
High 7
Slightly high 6
Average 5
Slightly low 4
Low 3
Very low 2
Extremely Low 1

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Back-up

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