Multi Criteria Decision Modeling Preference Ranking The Analytical Hierarchy Process

This leads to INCONSISTENT DECISIONS! It is difficult to conceptualize all elements of a problem. You may leave important elements out - or unimportant ones in! It is difficult to keep track of your priorities. Why is AHP needed? This leads to INCONSISTENT DECISIONS!

1. Active community involvement and participation in decision making processes 2. Incorporation of economic and social; objective and subjective considerations into decision making (i.e. integrated decision making). A Tool for Decision Support 3. Provides a theoretical basis for consistent decision making Major Advantages

AHP Preference Ranking 1. to elicit preferences for certain objectives relative to other objectives 2. to give the best, or several best, solutions from a range of potential solutions This tool is used:

- a goal or the focus of a problem - a finite number of alternative plans or options; - a set of criteria by which alternatives are to be judged; and - a method of ranking the alternatives based on how well they satisfy the objective Structure the Problem General Form

Where the name comes from General Structure of a Problem

Pairwise Comparisons Decision makers are asked... … The nature of the question depends on the desired outcome and level being compared When comparing criterion 1 to criterion 2,... ‘Which is more important?’ ‘Which has a greater impact?’ ‘Which is more likely to happen?’ or ‘Which is more preferred?’

Scale of Relative Importance Use this scale to articulate preferences Numerical Value ,4,6,8 Reciprocals Definition Equally important or preferred Slightly more important or preferred Strongly more important or preferred Very strongly more important or preferred Extremely more important or preferred Intermediate values to reflect compromise Used when the second criterion is dominant

An Industrial Targeting Example Structure of the problem Number of Jobs: quantity of the jobs Average Wage or Salary: quality of the jobs Level of Capital Investment: measure of permanency Impacts of Population Growth: social impact (traffic, public services) Level of Utility Requirements: pubic impact (infrastructure) Cleanliness of Industry: environmental impact Value added Multipliers: local economic impact Through pairwise comparisons the relative importance of the different impacts can be expressed. This includes those impacts that are subjective in nature.

.When comparing the number of jobs offered by a firm to the average wage level offered by a firm how important of a consideration is one impact over the other with respect to the attractiveness of a firm?.When comparing the number of jobs offered by a firm to the level of capital investment offered by a firm, how important of a consideration is one impact over the other with respect to the attractiveness of a firm? When comparing the number of jobs offered by a firm to the impacts of population growth, how important of a consideration is one impact over the other with respect to the attractiveness of a firm? … Etcetera, until each criterion has been compared to all other criteria An Industrial Targeting Example Decision Makers are Asked:

Industrial Targeting Example Pairwise Comparison Practice Run # JobsAvg. Pay Prop. Value Cleanliness # Jobs Avg. Pay Prop. Value Cleanliness Judgement Matrix # # # # # # 1/#

Pairwise Comparison Results from Bath County, Virginia

Expert Choice Software Pairwise Comparison Results Calculates the relative weights of the criteria Cleanliness of Industry Avg. Wage/Salary Impacts on Property Values Number of Jobs Impacts on Population Growth Level of Capital Investment Level of Utility Requirements Inconsistency Ratio: % 17.5% 11.5% 5.6% 4.8% 4.5% 4.0%

Consistency Pairwise Comparison Results Range: 0.0 perfect consistency, inconsistent 0% of the time 1.0 no consistency, inconsistent 100% of the time How do I interpret an IR? Inconsistency Ratio (IR) - a ratio or percentage of time decision makers are inconsistent in making judgements on a set of particular elements. How do I interpret an IR? Range: 0.0 perfect consistency, inconsistent 0% of the time 1.0 no consistency, inconsistent 100% of the time

Re-Examine the Pairwise Comparisons Expert Choice Software Calculates the relative weights of the criteria Cleanliness of Industry Avg. Wage/Salary Impacts on Property Values Number of Jobs Level of Capital Investment Level of Utility Requirements Impacts of Population Growth Inconsistency Ratio: % 15.9% 13.2% 6.3% 5.1% 4.7% 3.9%

(1) Priority weights can be used as information themselves for preference information - what is most preferred by the group (2) Priority weights can be applied to a set of data related to the criteria, to give the best alternative from a range of specific alternatives. What are these priorities good for?

Identify Goal Identify Alternatives Develop Criteria Weight Criteria Rank Alternatives Proposed Process Each LF Group through PIF The PIF Preference Ranking Team Each LF Through Pairwise Comparisons So, how do you implement this? Priority Weights Applied to Data