Lecture 2

Introduction to the ANP

A Single Criterion for Evaluating a
Decision

The Most General Law

The most general law of nature that also applies to humans is the Law of Influence. Every other
law including the laws of physics and the laws of crime and punishment are special cases of
that law. Influence is the power or capacity to produce an effect, a consequence. Effect is a
relative change in state. The law says that everything has an influence great or small on
something including itself. Influences are eternal. The opposite of influence is nothingness.
While the critical role of influence in almost all analyses is paramount, there is always the
question of how to identify it in a way that humans can comprehend it. In essence, it is how to
measure it.
The challenge is to determine what influences there are and what their effects would be and
how best to act on them when our short and long term interests are concerned. Scenarios can
be used for that purpose.
Always look for influences (control criteria), determine their kind: economic, social, political,
technological, psychological etc. and learn to prioritize their importance and dominance.
Prioritize their potential effects on the people involved and their preferences and learn to
synthesize them to find the best actions you can take to satisfy your goals (strategic criteria) in
the face of these influences.

Coordinate Systems and Influences

Because physical influence is a special case of general
influence, and because humans have physical bodies but can
exert non-physical kinds of influences, it is inadequate to
describe all aspects of influence within the space-time
coordinates of physics. The physical four dimensions are
part and only part of the higher dimensional space of all
influences. In addition the human mind that is capable of
detecting influence exists in a larger universe than the
physical one. To project ahead, a new concept of
sequencing and ordering that includes physical time and
psychological time is essential. We call it general time. All
influences are measured on the general time dimension.

What Are the Coordinates?

In the AHP/ANP, the general coordinates of
influence are what is known as control criteria.
They are physical-environmental, economic,
social, political, scientific-technological, medicalhealth, cultural, educational, ideological-religious,
artistic, military.
These kinds of influence can be studied in three
ways: objectively (what is important to individuals
and to groups), subjectively (what is preferred by
individuals and by groups), and chronologically
(what is likely). Both what is important and what is
preferred are subject to change and come under
the chronological likelihood of order. General
time is the major determinant of all outcomes:
short, mid-term and long term effects of influence.

NOMINAL SCALES
Invariant under one to one correspondence. Used to name
or label objects. Like assigning a number to each object; for example,
handing out numbers for order of service to people in a queue.

ORDINAL SCALES
Invariant under monotone transformations. Cannot be
multiplied or added even if the numbers belong to the
same scale. Things are ordered by number but the magnitudes of the
numbers only serve to designate order, increasing or decreasing; for
example, assigning two numbers 1 and 2, to two people to indicate that one
is taller than the other, without including any information about their actual
heights. The smaller number may be assigned to the taller person and vice
versa.

INTERVAL SCALES
Invariant under a linear transformation ax + b

a > 0 , b 0.

For example, the linear transformation F = (9/5) C + 32 for converting a

Celsius to a Fahrenheit temperature reading. Note that one cannot add two
readings on an interval scale. However, one can take an average of such
readings because dividing by their number yields the correct form.

RATIO SCALES
Invariant under a positive similarity transformation
ax, a > 0. An example is converting weight measured in
pounds to kilograms by using the similarity transformation K = 2.2 P. The ratio
of the weights of the two objects is the same regardless of whether the
measurements are done in pounds or in kilograms. The ratio of two readings
from a ratio scale such as 6 kg/ 3 kg = 2 is a number that belongs to an
absolute scale that says that the 6 kg object is twice heavier than the 3 kg
object. The ratio 2 cannot be changed by some formula to another number.
Thus we introduce the next scale.
Numbers from the same ratio scale can be added and multiplied . Different ratio scales
can be multiplied as in physics.

ABSOLUTE SCALES
Invariant under the identity transformation.Numbers in the
same absolute scale can be both added and multiplied.

Scales
Nominal Scale

invariant under one to one correspondence where a number is assigned to

each object; for example, handing out numbers for order of service to people in a queue.

Ordinal Scale

invariant under monotone transformations, where things are ordered by

number but the magnitudes of the numbers only serve to designate order, increasing or decreasing; for
example, assigning two numbers 1 and 2, to two people to indicate that one is taller than the other,
without including any information about their actual heights. The smaller number may be assigned to
the taller person and vice versa.

Interval Scale

invariant under a positive linear transformation; for example, the linear

transformation F = (9/5) C + 32 for converting a Celsius to a Fahrenheit temperature reading. Note
that one cannot add two readings and on an interval scale because then which is of the form and
not of the form . However, one can take an average of such readings because dividing by 2 yields the
correct form.

Ratio Scale

invariant under a similarity transformation; an example is converting weight

measured in pounds to kilograms by using the similarity transformation K = 2.2 P. The ratio of the
weights of the two objects is the same regardless of whether the measurements are done in pounds or
in kilograms. Zero is not the measurement of anything; it applies to objects that do not have the
property and in addition one cannot divide by zero to preserve ratios in a meaningful way. Note that
one can add two readings from a ratio scale, but not multiply them because does not have the form .
The ratio of two readings from a ratio scale such as 6 kg/ 3 kg = 2 is a number that belongs to an
absolute scale that says that the 6 kg object is twice heavier than the 3 kg object. The ratio 2 cannot
be changed by some formula to another number. Thus we introduce the next scale.

Absolute Scale:

invariant under the identity transformation x = x; for example, numbers used

in counting the people in a room.

ASSIGNING NUMBERS vs.

PAIRED COMPARISONS
A number assigned directly to an
object is at best an ordinal and
cannot be justified.
When we compare two objects or
ideas we use the smaller as a unit
and estimate the larger as a multiple
of that unit.

 If the objects are homogeneous and if

we have knowledge and experience,
paired comparisons actually derive
measurements that are likely to be close
and that indicate magnitude on an
absolute scale.

Linear Hierarchy
Goal
Criteria

Subcriteria

component,
cluster
(Level)
element

Alternatives

A loop indicates that each

element depends only on itsel

Important distinction between hierarchies and networks

In a hierarchy the criteria and their importance are

often brought to evaluate alternatives and to make a
decisions from previous knowledge of the subject. It
is more like what religion does in peoples lives.
It is an idealistic approach to decision making.
In a network everything can depend on everything
else. One not only asks which of two alternatives is
more dominant with respect to a criterion, but also

Why Prediction is Important in

Decision making
There is nothing more profitable for a man than to
take good counsel with himself; for even if the event
turns out contrary to one's hopes, still one's decision
was right, even though fortune made it of no effect:
whereas if a man acts contrary to good counsel, only
by luck he gets what he had no right to expect, his
decision was not any the less foolish.
Herodotus

Chess Factors
T (1) Calculation (Q): The ability of a player to evaluate different alternatives or strategies in light of prevailing
situations.
B (2) Ego (E): The image a player has of himself as to his general abilities and qualification and his desire to win.
T (3) Experience (EX): A composite of the versatility of opponents faced before, the strength of the tournaments
participated in, and the time of exposure to a rich variety of chess players.
B (4) Gamesmanship (G): The capability of a player to influence his opponent's game by destroying his
concentration and selfconfidence.
T (5) Good Health (GH): Physical and mental strength to withstand pressure and provide endurance.
B (6) Good Nerves and Will to Win (GN): The attitude of steadfastness that ensures a player's health perspective
while the going gets tough. He keeps in mind that the situation involves two people and that if he holds out the
tide may go in his favor.
T (7) Imagination (IM): Ability to perceive and improvise good tactics and strategies.
T (8) Intuition (IN): Ability to guess the opponent's intentions.
T (9) Game Aggressiveness (GA): The ability to exploit the opponent's weaknesses and mistakes to one's
advantage. Occasionally referred to as "killer instinct."
T (10) Long Range Planning (LRP): The ability of a player to foresee the outcome of a certain move, set up
desired situations that are more favorable, and work to alter the outcome.
T (11) Memory (M): Ability to remember previous games.
B (12) Personality (P): Manners and emotional strength, and their effects on the opponent in playing the game
and on the player in keeping his wits.
T (13) Preparation (PR): Study and review of previous games and ideas.
T (14) Quickness (Q): The ability of a player to see clearly the heart of a complex problem.
T (15) Relative Youth (RY): The vigor, aggressiveness, and daring to try new ideas and situations, a quality
usually attributed to young age.
T (16) Seconds (S): The ability of other experts to help one to analyze strategies between games.
B (17) Stamina (ST): Physical and psychological ability of a player to endure fatigue and pressure.
T (18) Technique (M): Ability to use and respond to different openings, improvise middle game tactics, and steer
the game to a familiar ground to one's advantage.

Chess Competition

Technical

EX

GH

IM

IN

GA

LRP

Behavioral

Player A

PR

RY

Player B

GNWW

ST

The Analytic Network Process

(ANP)
involves Dependence and
Real life problems involve dependence and
Feedback
feedback. Such phenomena can not be dealt
with in the framework of a hierarchy but we
can by using a network with priorities.
With feedback the alternatives can depend
on the criteria as in a hierarchy but may also
depend on each other.
The criteria themselves can depend on the
alternatives and on each other as well.
Feedback improves the priorities derived
from judgments and makes prediction more
accurate.

Feedback Network with components having

Inner and Outer Dependence among Their Elements

C4
C1
Feedback

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.

C2

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

AHP Causal, ANP Non-Causal and is a New

Way of Thinking and Synthesis
In the AHP we distribute priorities from the goal
downwards towards the alternatives and can logically
indicate the causes and intensities and their effects on
the alternatives at the bottom. The process allows us
through priorities to use a multi-valued logic because of
the use of an absolute scale to represent relative
intensities.
The ANP is far more general and powerful than the AHP
and its effects cannot be traced back through its loops
and cycles in a simple way to original causes. Strictly
speaking while the ANP deals with the outcome of
influence, it does it through an infinite cyclic process
which of course is nonlinear. Thus with good judgments
and scenarios, the ANP can be used to work backwards
from the future to the present to guide action towards a
more desired future.

Inner and Outer Dependence

and the Control Hierarchy
In a network, the elements in a component
may be people (e.g., individuals in the White House) and those
in another component may also be people (e.g., individuals in
Congress),
may influence other elements in the same component (inner
dependence) and those in other components (outer
dependence) with respect to each of several properties.
We want to determine the overall influence of all the elements.

organize the properties or criteria

prioritize them in the framework of a control hierarchy

perform comparisons
synthesize to obtain the priorities of these properties
derive the influence of elements in the feedback system
weight the resulting influences
obtain the overall influence of each element.

where
(j1)

Wi1
Wij =

(j1)

Wi2

(j1)

Wini

(j2)

(jnj)

(j2)

(jnj)

(j2)

(jnj)

Wi1

Wi2

Wini

Wi1
Wi2

Wini

Weighting The Components

In the ANP one often needs to prioritize the influence of the
components themselves on each other component to which
the elements belong. This influence is assessed through
paired comparisons with respect to a control criterion.
The priority of each component is used to weight the priorities
of all the elements in that component. The reason for doing
this is to enable us to perform feedback multiplication of
priorities by other priorities in a cycle, an infinite number of
times. The process would not converge unless the resulting
matrix of priorities is column stochastic (each of its columns
adds to one).
To see that one must compare clusters in real life, we note
that if a person is introduced as the president it makes much
difference, for example, whether he or she is the President of
the United States or the president of a local labor group.

Three Supermatrices in ANP

1. The original supermatrix of column eigenvectors
obtained from pairwise comparison matrices of elements
2. Weighted supermatrix in which each block of column
eigenvectors belonging to a component is weighted by the
priority of influence of that component. This renders the
weighted supermatrix column stochastic.
3. The limit supermatrix obtained by raising the weighted
supermatrix to large powers. There are two kinds of
limit supermatrices: one that does not cycle and one that
does. In the second case one uses the Cesaro sum for the
limit.

Supermatrix of a Hierarchy
C1

C2

e11

e1n e21

CN-2
e2n

e11

C1
e1n1
e21

C2

W=

e2n2

eN1

CN
eNnN

e(N-2)1

CN-1

e(N-2) nN-2
e(N-1)1

CN
eN1
e(N-1) nN-1

eNn

W21 0

0 W32

0
0

0
0

Wn-1, n-2 0
0
0 Wn, n-1 I

The (n,1) entry of the Limit Supermatrix yields the

Hierarchic Composition Principle as shown below.
0
0

0
0

0
0

0
0

0
0

W k=
Wn,n-1 Wn-1,n-2

W32 W21 Wn,n-1 Wn-1,n-2 W

...32

for k>n-1

Wn,n-1Wn-1,n-2 Wn,n-1 I

Goal
Satisfaction with School

Learning

Friends

School
A

School
Life

Vocational
Training

School
B

College
Prep.

Music
Classes

School
C

The School Hierarchy as Supermatrix

Goal
Learning
Friends
School life
Vocational training
College preparation
Music classes
Alternative A
Alternative B
Alternative C

Goal
0
0.32
0.14
0.03
0.13
0.24
0.14
0
0
0

Learning
0
0
0
0
0
0
0
0.16
0.59
0.25

Friends
0
0
0
0
0
0
0
0.33
0.33
0.34

School life Vocational trainingCollege preparation Music classes

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.45
0.77
0.25
0.69
0.09
0.06
0.5
0.09
0.46
0.17
0.25
0.22

A
0
0
0
0
0
0
0
1
0
0

B
0
0
0
0
0
0
0
0
1
0

C
0
0
0
0
0
0
0
0
0
1

Limiting Supermatrix & Hierarchic Composition

Goal
Learning
Friends
School life
Vocational training
College preparation
Music classes
Alternative A
Alternative B
Alternative C

Goal
0
0
0
0
0
0
0
0.3676
0.3781
0.2543

Learning
0
0
0
0
0
0
0
0.16
0.59
0.25

Friends
0
0
0
0
0
0
0
0.33
0.33
0.34

School life Vocational trainingCollege preparation Music classes

0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0.45
0.77
0.25
0.69
0.09
0.06
0.5
0.09
0.46
0.17
0.25
0.22

A
0
0
0
0
0
0
0
1
0
0

B
0
0
0
0
0
0
0
0
1
0

C
0
0
0
0
0
0
0
0
0
1

SOURCES AND SINKS

The goal of a hierarchy is a source component consisting of
one node that feeds into the nodes of the component in the
second level but nothing feeds back into it. The alternatives
of a hierarchy are sink nodes in the bottom level component
and do not feed back into any nodes in a higher level
component. The columns corresponding to sink nodes of a
network in the supermatrix must have a unit entry on the
diagonal corresponding to that node. Otherwise all these
columns entries would be zero and the weighted matrix
cannot be stochastic. A loop is implicitly attached to such
nodes with zero columns.

The Questions to Answer About the

Dominance of Influence
Four kinds of questions to answer in the ANP:
1.

Given a criterion, which of two elements has greater

influence (is more dominant) with respect to that criterion?

2.

Given an alternative, which of two criteria or properties is

more dominant in that alternative?

3.

Given a criterion and given an element X in any cluster,

which of two elements in the same cluster or in a different
cluster has greater influence on X with respect to that
criterion?

The entire decision must use the idea of something

influencing
another. Otherwise it must use the idea of influenced by
throughout the analysis as follows:
4.

Given a criterion and given an element X in any cluster,

which of two elements in the same or in a different cluster is

A Feedback System with Two Components

Flood
Control

Low
Level

Recreation

Intermediate
Level

HydroElectric
Power

High
Level

1) Which level is best for flood control?

Flood Control
Low
Low
1
Medium 1/5
High
1/7

Med
5
1
1/4

High Eigenvector
7
.722
4
.205
1
.073

Consistency Ratio = .107

2) Which level is best for recreation?

3) Which level is best for power generation?

Recreation

Power Generation

Low
Low
1
Medium 7
High
5

Med
1/7
1
1/3

High Eigenvector
1/5
.072
3
.649
1
.279

Consistency Ratio = .056

Low
Low
1
Medium 5
High
9

Med
1/5
1
5

High Eigenvector
1/9
.058
1/5
.207
1
.735

Consistency Ratio = .101

Flood Control
Recreation
Hydro-Electric
Power
2) At
Intermediate
Level, which
attribute is
satisfied best?

Flood Control
Recreation
Hydro-Electric
Power

Low Level Dam

F
R
E
1
3
5
1/3
1
3
1/5
1/3
1

Eigenvector
.637
.258
.105

Consistency Ratio = .033

Flood Control
Recreation
Hydro-Electric
Power
F
1
5
9

Intermediate Level Dam

F
R
E
1
1/3
1
3
1
3
1
1/3
1

1) At Low
Level, which
attribute is
satisfied best?

Eigenvector
.200
.600
.200

Consistency Ratio = .000

High Level Dam

R
E
1/5
1/9
1
1/4
4
1

Consistency Ratio = .061

Eigenvector
.060
.231
.709

3) At High
Level, which
attribute is
satisfied best?

The six eigenvectors were then

introduced as columns of the following
stochastic supermatrix.
F
F
R
E
L
M
H

0
0
0 .637 .200 .060
0
0
0 .258 .600 .231
0
0
0 .105 .200 .709
.722 .072 .058
0
0
0
.205 .649 .207
0
0
0
.073 .279 .735
0
0
0

One must ensure that all columns sum to

unity exactly.

The final priorities for both, the height of the dam and for the
criteria were obtained from the limiting power of the supermatrix.
The components were not weighted here because the matrix is
already column stochastic and would give the same limiting
result for the ratios even if multiplied by the weighting constants.
Its powers stabilize after a few iterations. We have

F
R
E
L
M
H

0
0
0
.223
.372
.405

0
0
0
.223
.372
.405

0
0
0
.223
.372
.405

.241
.374
.385
0
0
0

.241
.374
.385
0
0
0

.241
.374
.385
0
0
0

Date and Strength of Recovery of U.S. Economy

Primary Factors

Subfactors

Conventional
adjustment

Economic
Restructuring

Consumption (C)
Exports (X)
Investment (I)
Fiscal Policy (F)
Monetary Policy (M)
Confidence (K)

Financial Sector (FS)

Defense Posture (DP)
Global Competition (GC)

Adjustment Period
Required for
3 months
Turnaround

6 months

12 months

The U.S. Holarchy of Factors for Forecasting

Turnaround in Economic Stagnation

24

Date and Strength of Recovery of U.S. Economy

Conventional Economic
Adjustment Restructuring

Consumption (C)
Exports (E)
Investment (I)
Fiscal Policy (FP)
Monetary Policy (MP)
Confidence (K)

3 months

Primary Factors

Financial Sector (FS)

Defense Posture (DP)
Global Competition (GP)

6 months

12 months

24 months

Subfactors

Adjustment Period
Required for turnaround

Table 1: Matrices for subfactor importance relative to

primary factors influencing the Timing of Recovery

Panel A: Which subfactor has the greater potential to influence Conventional Adjustment and how s

C
Consumption
Exports
Investment
Confidence
Fiscal Policy
Monetary Policy

(C)1
(E) 1/7
(I) 1/5
(K) 5
(F) 2
(M)5

Vector
Weights

7
1
5
5
5
7

5
1/5
1
5
3
5

1/5
1/5
1/5
1
1/5
1

1/2
1/5
1/3
5
1
5

1/5
1/7
1/5
1
1/5
1

0.118
0.029
0.058
0.334
0.118
0.343

Panel B: Which subfactor has the greater potential to influence Economic Restructuring and how st

FS
Financial
Sector
(FS) 1
Defense
Posture
(DS) 1/3
Global
Competition
(GC)1/3

DP

GC

Vector
Weights

0.584

0.281

1/3

0.135

Table 2: Matrices for relative influence of subfactors on periods of

adjustment (months) (Conventional Adjustment)
For each panel below, which time period is more likely to indicate a turnaround if the relevant
factor is the sole driving force?
Panel B: Relative importance of targeted time
Panel A: Relative importance of targeted time
periods for exports to drive a turnaround
periods for consumption to drive a turnaround
3
6
12
24
Vec. Wts.
3
6
12
24
Vec. Wts.
3 months
6 months
12 months
24 months

1
5
7
7

1/5
1
5
5

1/7
1/5
1
3

1/7
1/5
1/3
1

.043
.113
.310
.534

Panel C: Relative importance of targeted time

periods for investment to drive a turnaround
3
6
12
24
Vec. Wts.
3 months
6 months
12 months
24 months

1
1
5
5

1
1
5
5

1/5
1/5
1
3

1/5
1/5
1/3
1

.078
.078
.305
.538

Panel E: Relative importance of targeted time

periods for monetary policy to drive a turnaround
3
3 months
6 months
12 months
24 months

1
1/5
1/7
1/7

12

24

5
1
1/5
1/7

7
5
1
5

7
7
1/5
1

3 months
6 months
12 months
24 months

1
1
5
5

1/5
1/5
1
1

1/5
1/5
1
1

.083
.083
.417
.417

Panel D: Relative importance of targeted time

periods for fiscal policy to drive a turnaround
3
6
12
24
Vec. Wts.
3 months
6 months
12 months
24 months

1
1
3
5

1
1
5
5

1/3
1/5
1
1

1/5
1/5
1
1

.099
.087
.382
.432

Panel F: Expected time for a change of confidence

indicators of consumer and investor activity to
support a turnaround in the economy

Vec. Wts.
.605
.262
.042
.091

1
1
5
5

3
3 months
6 months
12 months
24 months

1
1/3
1/5
1/5

12

3
1
1/5
1/5

5
5
1
1/5

24
5
5
5
1

Vec. Wts.
.517
.305
.124
.054

Table 3: Matrices for relative influence of subfactors on periods of adjustment

(months) (Economic Restructuring)
For each panel below, which time period is more likely to indicate a
turnaround if the relevant factor is the sole driving force?
Panel A: Financial system restructuring time
3
6
12
24
Vec. Wts.
3 months
6 months
12 months
24 months

1
3
5
7

1/3
1
5
7

1/5
1/5
1
5

1/7
1/7
1/5
1

Panel B: Defense readjustment time

3
6
12
24
3 months
6 months
12 months
24 months

.049
.085
.236
.630

1
3
5
7

1/3
1
5
7

1/5
1/5
1
5

1/7
1/7
1/5
1

Vec. Wts.
.049
.085
.236
.630

Panel C: Global competition adjustment time

3
3 months
6 months
12 months
24 months

1
1
5
5

6
1
1
5
5

12

24

1/5
1/5
1
3

1/5
1/5
1/3
1

Vec. Wts.
.078
.078
.305
.538

Table 4: Most likely factor to dominate during a specified time period

Which factor is more likely to produce a turnaround during the specified time period?
Panel A: 3 Months
CA
R

CA
1
1/5

R
5
1

Vec. Wts.
.833
.167

Panel B: 6 Months
CA
CA 1
R 1/5

R
5
1

Vec. Wts.
.833
.167

Conventional Adjustment
Restructuring

Panel C: 1 Year
CA
R

CA
1
1

R
1
1

CA
R

Panel D: 2 Years

Vec. Wts.
.500
.500

CA
R

CA
1
5

R Vec. Wts.
1/5
.167
1
.833

Table 5: The Completed Supermatrix

Conven.
Adjust
Economic.
Restru.

Conven. Economic. Consum.

Adjust Restruc.

Exports

Invest.

Confid.

Fiscal
Policy

Monet.
Policy

Financ.
Sector

Defense
Posture

Global
Compet.

3 mo.

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.500
0.167
0.833 0.833

0.500
0.833
0.167 0.167
+--------------------------

------+
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.118 0.0

Exports
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.029 0.0

Invest.
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.058 0.0

Confid.
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.334 0.0

Fiscal
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.118 0.0
Policy

Monetary 0.343 0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Policy ------+
+----+
Financ.
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.584 0.0
Sector

Defense
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.281 0.0
Posture

Global
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.135 0.0
Compet.
+----+
+------------------------------------------------------------------+
3 months 0.0
0.0
0.043
0.083
0.078
0.517
0.099
0.605
0.049
0.049
0.089 0.0

6 months 0.0
0.0
0.113
0.083
0.078
0.305
0.086
0.262
0.085
0.085
0.089 0.0

1 year
0.0
0.0
0.310
0.417
0.305
0.124
0.383
0.042
0.236
0.236
0.209 0.0

2
years
0.0
0.0
0.534
0.417
0.539
0.054
0.432
0.091
0.630
0.630
0.613

0.0

Consum.

6 mo.

1 yr.

2 years

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Table 6: The Limiting Supermatrix

Conven. Economic. Consum. Exports
Adjust Restruc.
Conven.
Adjust
Economic
Restru.
Consum.
Exports
Invest.
Confid.
Fiscal
Policy
Monetary
Policy
Financ.
Sector
Defense
Posture
Global
Compet.
3 months
6 months
1 year
2 years

0.0

Invest.

Confid.

Fiscal
Policy

Monet.
Policy

Financ.
Sector

Defense
Posture

Global
Compet.

3 mo.

6 mo.

1 yr.

2 years

0.0
0.484
0.484
0.484
0.484
0.484
0.484
0.484
0.484
0.484 0.0
0.0
0.0
0.0

0.0
0.0
0.516
0.516
0.516
0.516
0.516
0.516
0.516
0.516
0.516 0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.057
0.057
0.057
0.057

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.014
0.014
0.014
0.014

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.028
0.028
0.028
0.028

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.162
0.162
0.162
0.162

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.057
0.057
0.057
0.057

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.166
0.166
0.166
0.166

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.301
0.301
0.301
0.301

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.145
0.145
0.145
0.145

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.070
0.070
0.070
0.070

0.224
0.224 0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.151
0.151 0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.201
0.201 0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.424
0.424 0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

Synthesis/Results
When the judgments were made, the AHP framework
was used to perform a synthesis that produced the
following results. First a meaningful turnaround in the
economy would likely require an additional ten to
eleven months, occurring during the fourth quarter of
1992. This forecast is derived from weights generated
in the first column of the limiting matrix in Table 6,
coupled with the mid-points of the alternate time
periods (so as to provide unbiased estimates:
.224 x 1.5 + .151 x 4.5 + .201 x 9 + .424 x 18 =
10.45 months from late December 1991/early January
1992

US Economy Turnaround 2001-2002

Time period

Midpoint of time period

(in months from 0)

Three months
Six months
Twelve months
Twenty Four

0 + (3 0 )/2 = 1.5
3 + (6 3)/2 = 4.5
6 + (12 6)/2 = 9.0
12 + (24 12)/2 = 18.0

Priority of Time period

.30581
.20583
.18181
.30656

Midpt x Priority

.45871
.92623
1.63629
5.51808
TOTAL 8.53932

This exercise was done in early April,

2001 and therefore the forecast is
that the recovery from the slow down
will occur around the end of the year.

Using midpts of Alternative Times

2001 Prediction made April 7, 2001
Months Midpoint Priorities Midpt x Priorities
Zero
0
0
Three Months
3
1.5
0.30581
0.458715
Six Months
6
4.5
0.20583
0.926235
Twelve Months
12
9
0.18181
1.63629
Twenty Four Months
24
18
0.30656
5.51808
SUM
8.53932
Turnaround of present slump in U.S. economy is
predicted in about 8 1/2 months from April 2001 which
would be around Dec. 2001

This exercise was done in

early April, 2001 and
therefore the forecast is
that the economy will
recover from the slow down
about 8 months from
now, or around the end of
the year.

The Wall Street Journal

Friday, July 18, 2003

Despite Job Losses, the Recession

Is Finally Declared Officially Over
JON E. HILSENRATH
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.
Most economists concluded more than
a year ago that the recession ended in late
2001. But yesterday's declaration by the
NBER-a private, nonprofit economic research
group that is considered the official
arbiter of recession timing-came after a
lengthy internal debate over whether
there can be an economic recovery if the
labor market continues to contract.
The bureau's answer: a decisive yes.

When calling the end to a recession,

the NBER focuses heavily on two economic
indicators: the level of employment
and gross domestic product, or the
total value of the nation's goods and services.
Since the fourth quarter of 2001, GDP has
expanded slowly but consistently-rising 4 %
through March of 2003.
Employers, however, have eliminated
938,000 payroll jobs since November 2001.
In addition, 150,000 people have dropped
out of the labor force because they are
discouraged about their job prospects,
according to the government.

"It has been an inadequate recovery,"

said N. Gregory Mankiw, chairman of
President Bush's Council of Economic
Advisers, who served on the NBER committee that determines recession dates until
he joined the Bush administration earlier
this year. He said the White House is
expecting growth to accelerate to a rate
of slightly less than 4 in the months
ahead, which should begin to bring down
unemployment.
The group's long-running debate on
the timing of the recession sheds light on
broader structural shifts that have made
this business cycle much different from
previous cycles and on how the economy
responded to the shocks of Sept. 11.
In typical recoveries since the end of
World War II, economic output has
bounced back sharply as businesses
rushed to rebuild inventories and invest in
new equipment. With demand for their
products and services growing more
quickly than their ability to produce,
managers soon started hiring additional
workers.

This time, economic growth has been

unusually slow-a product of intense competition from abroad, the hangover from
the technology and stock-market collapse,
terrorism concerns and other factors.
At the same time, the productivity
of workers has been unusually strong,
meaning that business can meet sluggish
demand for products while still eliminating
jobs. The result has been a recovery
in the eyes of economists that doesn't
feel like one to many workers.
"This is meaningless from the point of
view of people worried about their jobs,
but meaningful for economic researchers,
said Lawrence Mishel, president of
the Economic Policy Institute, a left-leaning
Washington think tank.
The NBER acknowledged as much in
its statement announcing that the recession
ended 20 months ago. "The main reason that the
committee's decision in this episode was particularly
difficult was the divergent behavior of employment,"
the NBER said in a statement.
"In terms of the decline in output, it ranks as a
relatively mild recession, said Robert Hall, a
Stanford University economics professor who is
chairman of the NBER committee. "The labor market
side is quite different.

Hamburger Model
Estimating Market Share of Wendys, Burger King and McDonalds
with respect to the single economic control criterion

How
How to
to Pose
Pose the
the Question
Question to
to
Make
Make Paired
Paired Comparisons
Comparisons
One
Onemust
mustanswer
answerquestions
questionsof
ofthe
thefollowing
followingkind:
kind:given
given
McDonalds
McDonalds(in
(inthe
theAlternatives
Alternativescluster)
cluster)isisits
itseconomic
economic
strength
strengthderived
derivedmore
morefrom
fromCreativity
Creativityor
orfrom
fromFrequency
Frequency
(both
(bothin
inthe
theAdvertising
Advertisingcluster)?
cluster)? Conversely,
Conversely,given
given
Creativity
Creativityininthe
theAdvertising
Advertisingcluster
clusterwho
whoisismore
more
dominant,
dominant,McDonalds
McDonaldsor
orBurger
BurgerKing?
King?
Then,
Then,again,
again,by
bycomparing
comparingthe
thedominance
dominanceimpact
impactof
ofthe
the
clusters
clustersof
ofAdvertising
Advertisingand
andQuality
Qualityof
ofFood
Foodon
onthe
the
economic
economicsuccess
successof
ofMcDonald
McDonaldby
byweighting
weightingand
and
normalizing
normalizingwe
wecan
canrelate
relatethe
therelative
relativeeffect
effectofofelements
elementsinin
these
thesedifferent
differentclusters.
clusters.

Hamburger Model Supermatrix

Other

O
t
h
e
r
Q
Ad
C
o
m
p

Quality

Advertising

Competition

Local:

Menu

Cleanli
ness

Speed

Service

Location

Price

Reputa
tion

Take
Out

Portion

Taste

Nutri
tion

Freq
uency

Promo
tion

Creativ
ity

Wendys

Burger
King

McDonalds

Menu Item
Cleanliness
Speed
Service
Location
Price
Reputation
Take-Out
Portion
Taste
Nutrition
Frequency
Promotion
Creativity
Wendy's
Burger King
McDonalds

0.0000
0.6370
0.1940
0.0000
0.0530
0.1170
0.0000
0.0000
0.2290
0.6960
0.0750
0.7500
0.1710
0.0780
0.3110
0.1960
0.4930

0.0000
0.0000
0.7500
0.0780
0.1710
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.5000
0.2500
0.2500

0.0000
0.0000
0.0000
0.1880
0.0000
0.0000
0.0810
0.7310
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0990
0.3640
0.5370

0.0000
0.5190
0.2850
0.0000
0.0980
0.0000
0.0980
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.5280
0.1400
0.3330

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0950
0.2500
0.6550

0.0000
0.0000
0.0000
0.0000
0.5000
0.0000
0.0000
0.5000
0.8330
0.0000
0.1670
0.1670
0.8330
0.0000
0.0950
0.2500
0.6550

0.1930
0.2390
0.0830
0.0450
0.2640
0.0620
0.0570
0.0570
0.2800
0.6270
0.0940
0.5500
0.3680
0.0820
0.1010
0.2260
0.6740

0.0000
0.0000
0.2900
0.0550
0.6550
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.1960
0.3110
0.4940

0.0000
0.0000
0.0000
0.0000
0.0000
0.8570
0.0000
0.1430
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.2760
0.1280
0.5950

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.6050
0.1050
0.2910

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.5940
0.1570
0.2490

0.3110
0.0000
0.0000
0.0000
0.1960
0.0000
0.4930
0.0000
0.0000
0.0000
0.0000
0.0000
0.5000
0.5000
0.0880
0.1950
0.7170

0.1670
0.0000
0.0000
0.0000
0.0000
0.8330
0.0000
0.0000
0.0000
0.0000
0.0000
0.6670
0.0000
0.3330
0.0880
0.1950
0.7170

0.1350
0.0000
0.0000
0.0000
0.7100
0.0000
0.1550
0.0000
0.0000
0.0000
0.0000
0.8750
0.1250
0.0000
0.1170
0.2680
0.6140

0.1570
0.2760
0.0640
0.0650
0.1420
0.0300
0.2070
0.0590
0.0940
0.2800
0.6270
0.6490
0.0720
0.2790
0.0000
0.2500
0.7500

0.0510
0.1100
0.1400
0.1430
0.2240
0.2390
0.0420
0.0510
0.6490
0.0720
0.2790
0.7090
0.1130
0.1790
0.1670
0.0000
0.8330

0.1590
0.3330
0.0480
0.0240
0.1070
0.0330
0.2230
0.0740
0.5280
0.1400
0.3320
0.6610
0.1310
0.2080
0.2000
0.8000
0.0000

Cluster Priorities Matrix

Cluster:
Other
Quality
Advertising
Competition

Other
0.198
0.066
0.607
0.129

Quality
0.500
0.000
0.000
0.500

Advertising
0.131
0.000
0.622
0.247

Competition
0.187
0.066
0.533
0.215

Weighted Supermatrix
Weighted:

Menu

Cleanli
ness

Speed

Service

Location

Price

Reputa
tion

Take
Out

Portion

Taste

Nutri
tion

Freq
uency

Promo
tion

Creativ
ity

Wendys

Burger
King

McDonalds

Menu Item
Cleanliness
Speed
Service
Location
Price
Reputation
Take-Out
Portion
Taste
Nutrition
Frequency
Promotion
Creativity
Wendy's
Burger King
McDonald s

0.0000
0.1262
0.0384
0.0000
0.0105
0.0232
0.0000
0.0000
0.0151
0.0460
0.0050
0.4554
0.1038
0.0474
0.0401
0.0253
0.0636

0.0000
0.0000
0.4544
0.0473
0.1036
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.1974
0.0987
0.0987

0.0000
0.0000
0.0000
0.1138
0.0000
0.0000
0.0490
0.4426
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0391
0.1436
0.2118

0.0000
0.3141
0.1725
0.0000
0.0593
0.0000
0.0593
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.2082
0.0552
0.1313

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0950
0.2500
0.6550

0.0000
0.0000
0.0000
0.0000
0.0990
0.0000
0.0000
0.0990
0.0550
0.0000
0.0110
0.1014
0.5056
0.0000
0.0123
0.0323
0.0845

0.0382
0.0473
0.0164
0.0089
0.0523
0.0123
0.0113
0.0113
0.0185
0.0414
0.0062
0.3338
0.2233
0.0498
0.0130
0.0291
0.0869

0.0000
0.0000
0.1755
0.0333
0.3964
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0773
0.1226
0.1948

0.0000
0.0000
0.0000
0.0000
0.0000
0.4287
0.0000
0.0715
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.1381
0.0640
0.2976

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.6044
0.1049
0.2907

0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.5940
0.1570
0.2490

0.0407
0.0000
0.0000
0.0000
0.0257
0.0000
0.0646
0.0000
0.0000
0.0000
0.0000
0.0000
0.3110
0.3110
0.0217
0.0482
0.1771

0.0219
0.0000
0.0000
0.0000
0.0000
0.1091
0.0000
0.0000
0.0000
0.0000
0.0000
0.4149
0.0000
0.2071
0.0217
0.0482
0.1771

0.0177
0.0000
0.0000
0.0000
0.0930
0.0000
0.0203
0.0000
0.0000
0.0000
0.0000
0.5444
0.0778
0.0000
0.0289
0.0662
0.1517

0.0293
0.0516
0.0120
0.0121
0.0265
0.0056
0.0387
0.0110
0.0062
0.0185
0.0413
0.3455
0.0383
0.1485
0.0000
0.0537
0.1611

0.0095
0.0205
0.0261
0.0267
0.0418
0.0446
0.0078
0.0095
0.0428
0.0047
0.0184
0.3773
0.0601
0.0953
0.0359
0.0000
0.1788

0.0297
0.0622
0.0090
0.0045
0.0200
0.0062
0.0417
0.0138
0.0348
0.0092
0.0219
0.3519
0.0697
0.1107
0.0429
0.1718
0.0000

Limiting Supermatrix

Synthesized:
Global

Menu

Cleanli
ness

Speed

Service

Location

Price

Reputa
tion

Take
Out

Portion

Taste

Nutri
tion

Freq
uency

Promo
tion

Creativ
ity

Wendys

Burger
King

McDonalds

Menu Item
Cleanliness
Speed
Service
Location
Price
Reputation
Take-Out
Portion
Taste
Nutrition
Frequency
Promotion
Creativity
Wendy's
Burger King
McDonalds

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

0.0234
0.0203
0.0185
0.0072
0.0397
0.0244
0.0296
0.0152
0.0114
0.0049
0.0073
0.2518
0.1279
0.1388
0.0435
0.0784
0.1579

Relative local weights: Wendys= 0.156, Burger King =0.281, and McDonalds=0.566

Validation
The same problem worked as a
simple and
a complex hierarchy and as a
feedback network.

Hamburger Model

Synthesized Local:
Other

Quality

Menu Item
Cleanliness
Speed
Service
Location
Price
Reputation
Take-Out
Portion
Taste
Nutrition
Simple Hierarchy
(Three Level)

Wendys
Burger King
McDonalds

0.3055
0.2305
0.4640

0.132
0.115
0.104
0.040 Synthesized Local Contd:
0.224
Advertising
Frequency
0.138
Promotion
0.167
Creativity
0.086
Competition
Wendys
0.494
Burger King
0.214
McDonalds
0.316
Complex Hierarchy
(Several Levels)
0.1884
0.2689
0.5427

Feedback
Network
0.156
0.281
0.566

0.485
0.246
0.267
0.156
0.281
0.566
Actual
Market
Share
0.1320
0.2857
0.5823

Income

Relative Relative
Share
Share
(Income (Model)
)

Total

7,914,051

TELESP

5,104,000

64.5

64.5

BCP

1,778,951

22.5

20.9

TESS

1,032,000

13.0

14.6

Airlines Market Shares

Model Results

Actual
(yr 2000)

American

23.9

24.0

United

18.7

19.7

Delta

18.0

18.0

Northwest

11.4

12.4

Continental

9.3

10.0

US Airways

7.5

7.1

Southwest

5.9

6.4

American West 4.4

2.9

Alternatives

Nike

Reebok

Adidas

Actual Market
Share

39.200

15.100

10.900

Estimated Mkt Shr

40.670

15.040

11.330

Others

34.800

32.970

Cell Phone Companies Market Share

Saaty Compatibility Index

Given two sets of positive numbers, form the
matrix of ratios of all the numbers in one set;
Then form the matrix of ratios of all the numbers
in the second set.
Take the transpose of the second matrix.
Multiply the two matrices elementwise
(i.e., perform Hadamard multiplication).
Add all the resulting numbers and divide by n2.
If the two sets of numbers are identical the result
would be equal to one.
If, after dividing by n2, the ratio is 1.1 or less the
two sets of numbers are said to be compatible,
otherwise not.

Estimate American, Asian,

European Car Makers Market
Share

Model by Y. Voravetvudhikun, March 2002

Model Share Estimate from Model

Using a single feedback network that incorporated what
are thought to be the driving factors in automaker market
share, the relative market share was estimated at:
American 53.8%
Asian 30.3%
European 15.9%

The results were compared to the real market share of

passenger cars in US in 2000 from US Business Reporter
website: www. activemedia-guid.com/automrkt mrkt.htm
From their data the Big Three: GM, Ford and Daimler
Chrysler, were grouped together to get the actual American
Share at 55%; Toyota, Honda, Nissan and Hyundai were
grouped for Asian at 28.4%; and VW, BMW, Mercedes Benz,
Volvo, Audi, Fiat, etc. were grouped for European at 16.6%.

Car maker Actual

Model
Mkt Share Mkt Share
American

55%

53.8%

Asian
European

28.4%
16.6%

30.3%
15.9%

Amit Prashar (February, 2005 class)upon seeing his market share results wrote:
Actual Market Values
Dell
64.75% 67.83%
IBM
22.60% 23.56%
Toshiba 12.64% 8.61%

Super Decision Output

Saaty Compatibility Index 1.041 which is much less than 1.10 recommended
The results are very close ( I WAS REALLY STUNNED..Geez..- UNBELIEVABLE)

0.05
0.47

0.10

0.15

0.24

RELATION BETWEEN MULTICRITERA SYNTHESIS

WITH ABSOLUTE NUMBERS AND WITH RELATIVE
NUMBERS (CRITERIA WEIGHTS DEPEND ON THE
THE MEASUREMENTS OF THE ALTERNATIVES)
Assume that we have two criteria and two alternatives measured in dollars. To
synthesize with relative measurement, we see that the criteria inherit their
importance from the relative total measurement of the alternatives under each to
the total under both. If we normalize the values of the alternatives under each
criterion, weight by the importance of that criterion and add, we obtain their
normalized final values. The criteria weights depend on the weights of the
alternatives and a feedback network structure is needed.
Relative Synthesis
Absolute Synthesis
C1

C2

Sum

Normalized
Sum

C1

C2

(3/10)

(7/10)

Weighte
d Sum

A1

4/10

A1

1/3

3/7

4/10

A2

6/10

A2

2/3

4/7

6/10

CRITERIA WEIGHTS INDEPENDENT FROM THE

WEIGHTS OF THE ALTERNATIVES (THE IDEAL)
In a hierarchy, the weights of the criteria are derived
independently from the measurements of the alternatives. In that
case we can continue to use the measurements, but need to use the
idealized form of the alternatives by dividing by the largest value
in each column. The proportionality among the alternatives
remains the same as before, even when the values are different.
Absolute Measurement

Ideal Measurement

Different
measures

C1

C2

Idealized
Values

C1

C2

A1

A1

1/5

A2

A2

2/3

Why Is the Eigenvector Necessary

1) Consistent matrix: Aw nw; Ak n k 1 A.
2) Perturbed matrix: Aw max w.
1 m k
3) Transitivity lim A e / eT Ak e w, eT (1,...,1). By Cesaro sumability
k m
k 1
this converges to the same limit as Ak e / eT Ak e.
4) Necessity : Priority must be invariant with respect to whatever process of
synthesis one chooses. We start with an initial priority vector (1,...,1) and then
derive a first estimate of priorities from it. We then use this vector it to weight
the alternatives or weight squares of differences and derive a new priority vector,
and so on. For uniqueness we must have A ox cx, where o indicates the
composition principle used and c indicates proportionality of the new vector cx
and the old vector x. For additive composition we have Ax cx. More generally,
Ak x c k x and because initially x e, Ak e c k e w, the principal right eigenvector
of A. Thus it is necessary to use the eigenvector to derive a priority vector.

 a11

a21

a12 a11

a22 a21
a11

a11

a12

a11

a21

a 12
a11a11 a12 a21

a 22
a21a11 a22 a21
+

a11

a12

a21

a21

a22

a21
a12

a11a12 a12
a22

a21a12 a22
a22
a22

a12

a22

a22

A1 ... An
A1 w1 w1 ... w1 wn

Aw M M ... M
An wn w1 ... wn wn

w1
M

wn

w1
n M n w

wn

iaijji

Let A1, A2,, An, be a set of stimuli. The

quantified judgments on pairs of stimuli Ai, Aj, are
represented by an nbyn matrix A = (aij), ij = 1,
2, . . ., n. The entries aij are defined by the
following entry rules. If aij = a, then aji = 1 /a, a
0. If Ai is judged to be of equal relative intensity
to Aj then aij = 1, aji = 1, in particular, aii = 1 for
1
a12 ... a1n

all i.

1/ a

12

1
M

1/ a1n 1/ a2 n

... a2 n
M M

... 1

How to go from

Aw=nw

to

Aw=cw

and then to

Aw=maxw

Clearly in the first formula n is a simple eigenvalue and all other

eigenvalues are equal to zero.
A forcing perurbation of eigenvalues theorem:
If is a simple eigenvalue of A, then for small > 0, there is an
eigenvalue () of A() with power series expansion in :

()= + (1)+ 2 (2)+

and corresponding right and left eigenvectors w () and v () such
that
w()= w+ w(1)+ 2 w(2)+
v()= v+ v(1)+ 2 v(2)+

ij

w j = max wi

j=1

w =
i

i=1

 1 2
1 0
0
A
, I
, I

3
4
0
1
0

2
1
( A I )

3
4

A I (1 )(4 ) 6 2 5 2 0
5 33
2
5 33
2
2
1

wj

j 1

j 1

wi

wj

j 1

wi

max aij aij

min aij aij
j 1

max for max wi

max for min wi
n

j 1

j 1

Thus for a row stochastic matrix we have 1= min aij max max aij 1, thus max =1.

Sensitivity of the Eigenvector

n

w1 = ( vTj A w1 /( 1 - j ) vTj w j ) w j
j= 2

The eigenvector w1 is insensitive to perturbation in A, if 1) the number of terms is small

(i.e. n is small), 2) if the principal eigenvalue 1 is separated from the other eigenvalues ,
here assumed to be distinct (otherwise a slightly more complicated argument can also be
made and is given below) and, 3) if none of the products vjT wj of left and right
eigenvectors is small and if one of them is small, they are all small. Howerver, v1T w1, the
product of the normalized left and right principal eigenvectors of a consistent matrix is
equal to n which as an integer is never very small. If n is relatively small and the
elements being compared are homogeneous, none of the components of w1 is arbitrarily
small and correspondingly, none of the components of v1T is arbitrarily small. Their
product cannot be arbitrarily small, and thus w is insensitive to small perturbations of the
consistent matrix A. The conclusion is that n must be small, and one must compare
homogeneous elements.
When the eigenvalues have greater multiplicity than one, the corresponding left and right
eigenvectors will not be unique. In that case the cosine of the angle between them which
is given by corresponds to a particular choice of and . Even when and correspond to a
simple they are arbitrary to within a multiplicative complex constant of unit modulus, but
in that case | viT wi| is fully determined. Because both vectors are normalized, we always
have | viT wi | <1.

Fundamentals of the AHP/ANP

How to structure complexity as a hierarchy or as a
network;
Why make comparisons to derive priorities;
Why reciprocals and why homogeneous groups of
elements;
Why the fundamental scale 1-9, what does it mean to
assign a number for a judgment;
Why allow inconsistency;
What is the minimum number of judgments needed
and why use redundant judgments;

Why absolute numbers and absolute scales;

Why weight and add for synthesis;
Why the distributive and ideal modes;
Why the supermatrix and what does raising it
to powers do;
Why stochastic supermatrix;
Why weight the components;
Why BOCR why add benefits and
opportunities and subtract costs and risks ;
Why the ideal mode;
How to allocate resources the need for ratio

Some Answers
(Only to be a little helpful)
One structures a hierarchy from a goal download to criteria, subcriteria and goals, involving actors
and stakeholders and terminating in alternatives at the bottom. The ideas to go gradually from the
general to the particular. In a network, elements are put in clusters or components with their
connections indicating influence.
Comparisons are more scientific in deriving scales because they use a unit and estimate multiples of
that unit rather than simply assigning numbers by guessing.
Reciprocals are needed because if one element is five times more important than another then the
other is a forteori one fifth as important as the first. One deals with homogeneous clusters to make
the comparisons possible, closer and more accurate.
The scale 1-9 helps us quantify our feelings and judgments in comparing elements.
Human judgment expressed in the form of paired comparisons is naturally inconsistent. A modicum
of inconsistency enables us to improve our understanding by focusing on the most inconsistent
judgments.
The minimum number of judgments needed to connect n elements is n-1. Redundant judgments
improve the validity of the derived priority vector.
Ratios and ratio scales give us information on both the rank order of the elements and on their
relative values. It also makes possible proportionate resource allocation.
Weighting and adding follows from simple operations we do all the time and is no different for
priorities. Suppose the goal has two components of values 0.6 and 0.4, and assume that one has a 0.2
share in the first component and a 0.7 share in the second. The total share with respect to the goal is
0.6 x 0.2 + 0.4 x 0.7 = 0.4.
The supermatrix is the framework for organizing the priorities derived from paired comparisons.
Raising it to powers gives the overall influence of each element on all the other elements.

WHY IS AHP EASY TO USE?

It does not take for granted the
measurements on scales, but asks that
scale values be interpreted according
to the objectives of the problem.
It relies on elaborate hierarchic
structures to represent decision problems and is able to handle problems of
risk, conflict, and prediction.

 It can be used to make direct

resource allocation, benefit/cost
analysis, resolve conflicts, design
and optimize systems.
It is an approach that describes
how good decisions are made rather
than prescribes how they should be
made.

WHY THE AHP IS POWERFUL

IN CORPORATE PLANNING
1. Breaks down criteria into manageable components.
2. Leads a group into making a specific
decision for consensus or tradeoff.
3. Provides opportunity to examine
disagreements and stimulate
discussion and opinion.

4. Offers opportunity to change

criteria, modify judgments.
5. Forces one to face the entire
problem at once.
6. Offers an actual measurement
system. It enables one to
estimate relative magnitudes and
derive ratio scale priorities
accurately.

7. It organizes, prioritizes and

synthesizes complexity within a
rational framework.
8. Interprets experience in a relevant
way without reliance on a black
box technique like a utility function.
9. Makes it possible to deal with
conflicts in perception and in
judgment.