THE ANALYTIC HIERARCHY PROCESS INTRODUCTION

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THE ANALYTIC HIERARCHY PROCESSINTRODUCTION
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INTRODUCTION

• The Analytic Hierarchy Process (AHP) is an
  alternate approach to expected utility.
• AHP successfully addresses the limitations of
  expected utility.
• AHP is implemented using the software package
  called Expert Choice.

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INTRODUCTION

• What is the Analytic Hierarchy Process (AHP)?
• The AHP, developed by Tom Saaty, is a
  decision-making method for prioritizing
  alternatives when multi-criteria must be
  considered.
• An approach for structuring a problem as a
  hierarchy or set of integrated levels.

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INTRODUCTION

• AHP problems are structured in at least three
  levels
• The goal, such as selecting the best car to
  purchase,
• The criteria, such as cost, safety, and
  appearance,
• The alternatives, namely the cars themselves.

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INTRODUCTION

• The decision-maker
• measures the extent to which each alternative
  achieves each criterion, and
• determines the relative importance of the
  criteria in meeting the goal, and
• synthesizes the results to determine the relative
  importance of the alternatives in meeting the
  goal.

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APPROACH

• How does AHP capture human judgments?
• AHP never requires you to make an absolute
  judgment or assessment. You would never be asked
  to directly estimate the weight of a stone in
  kilograms.
• AHP does require you to make a relative
  assessment between two items at a time. AHP uses
  a ratio scale of measurement.

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APPROACH

• Suppose the weights of two stones are being
  assessed. AHP would ask How much heavier (or
  lighter) is stone A compared to stone B?
• AHP might tell us that, of the total weight of
  stones A and B, stone A has 65 of the total
  weight, whereas, stone B has 35 of the total
  weight.

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APPROACH

• Individual AHP judgments are called pairwise
  comparisons.
• These judgments can be based on objective or
  subjective information.
• For example, smoothness might be a subjective
  criterion used to compare two stones. Pairwise
  comparisons could be based on touch.

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APPROACH

• However, suppose stone A is a diamond worth
  1,000.00 and stone B is a ruby worth 300.00.
• This objective information could be used as a
  basis for a pairwise comparison based on the
  value of the stones.

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APPROACH

• Consistency of judgments can also be measured.
  Consistency is important when three or more items
  are being compared.
• Suppose we judge a basketball to be twice as
  large as a soccer ball and a soccer ball to be
  three times as large as a softball.

To be perfectly consistent, a basketball must be
six times as large as a softball.
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APPROACH

• AHP does not require perfect consistency,
  however, it does provide a measure of
  consistency.
• We will discuss consistency in more detail later.

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AHP APPLICATIONS

• AHP has been successfully applied to a variety of
  problems.
• 1. RD projects and research papers
• 2. vendors, transport carriers, and site
  locations
• 3. employee appraisal and salary increases
• 4. product formulation and pharmaceutical
  licensing
• 5. capital budgeting and strategic planning
• 6. surgical residents, medical treatment, and
  diagnostic testing.

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AHP APPLICATIONS

• The product and service evaluations prepared by
  consumer testing services is another potential
  application.
• Products and services, such as self propelled
  lawn mowers are evaluated.
• Factors include bagging, mulching, discharging,
  handling, and ease of use.
• An overall score for each mower is determined.

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AHP APPLICATIONS

• Would you make your purchasing decision based
  solely on this score?
• Probably not! Some of the information will be
  helpful.
• Some additional questions are
• How important is each criterion?
• Would you weigh the criteria the same way?
• Are all of the criteria considered important to
  you?
• Are there other criteria that are important to
  you?
• Have you ever thought about these issues?

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RANKING SPORTS RECORDS

• The AHP has been used to rank outstanding season,
  career, and single event records across sports.
• Season
• 1. Babe Ruth, 1920 .847 slugging average
• 2. Joe DiMaggio, 1944 56 game hitting streak
• 3. Wilt Chamberlain, 1961-62 50.4 points per
  game scoring average

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RANKING SPORTS RECORDS

• Career
• 1. Johnny Unitas, 1956-70 touchdown passes in 47
  consecutive games
• 2. Babe Ruth, 1914-35 .690 slugging average
• 3. Walter Payton, 1975-86 16,193 rushing yardage
• Single event
• 1. Wilt Chamberlain, 1962 100 points scored
• 2. Norm Van Brocklin, 1951 554 passing yards
• 3. Bob Beamon, 1968 29' 2.5" long jump

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RANKING SPORTS RECORDS

• How do we compare records from different sports?
• It all depends on the criteria that you select!
• Golden and Wasil (1987) used the following
  criteria
• 1. Duration of record - years record has stood,
  years expected to stand
• 2. Incremental improvement - better than
  previous record
• 3. Other record characteristics - glamour, purity
  (single person vs. team)

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RANKING SPORTS RECORDS

• Did this article end all arguments about sports
  records?
• Absolutely not!
• In bars and living rooms across the country,
  people still argue about sports.
• AHP provides a methodology to structure the
  debate.
• Different criteria and different judgments could
  produce different results.

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A FINAL POINT ABOUT SPORTS

• In reading the sports pages we often see
  discussion of how well teams match up across
  different positions.
• These match-ups are often used to predict a
  winner.
• Match-ups is a pairwise comparison concept!

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AHP APPLICATIONS

• Our culture is obsessed with quantitative
  rankings of all sorts of things.
• There are many measurement problems associated
  with rankings of products, sports teams,
  universities, and the like.
• Many of these issues are discussed on a web site
  at
• http//www.expertchoice.com/annie.person

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APPLES AND ORANGES

• The discussion of how to compare records from
  different sports recalls a saying from childhood

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APPLES AND ORANGES

• The discussion of how to compare records from
  different sports recalls a saying from childhood
• You cant compare apples and oranges.
• All you get is mixed fruit!

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APPLES AND ORANGES

• The discussion of how to compare records from
  different sports recalls a saying from childhood
• You cant compare apples and oranges.
• All you get is mixed fruit!
• After the discussion about sports,
• do you still believe this statement?

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APPLES AND ORANGES

• The discussion of how to compare records from
  different sports recalls a saying from childhood
• You cant compare apples and oranges.
• All you get is mixed fruit!
• After the discussion about sports,
• do you still believe this statement?
• We hope not!!!

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APPLES AND ORANGES

• What criteria might you use when comparing apples
  and oranges?
• There are a vast set of criteria that may change
  depending upon time of day or season of year
• taste, texture, smell,
• ripeness, juiciness, nutrition,
• shape, weight, color, and
• cost.
• Can you think of others?

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APPLES AND ORANGES

• The point is that people are often confronted
  with the choice between apples and oranges.
• Their choice is based on some psychological
  assessment of
• relevant criteria,
• their importance, and
• how well the alternatives achieve the criteria.