ANALYTICAL HIERARCHY PROCESS

1. Definition; 2. Features; 3. Application; 4.Implementation &

Methodology; 5. Case Studies
By: Priyanka Kumawat, Reshma Khan, Sakshi Jain & Shipra Goswami

What is Analytical Hierarchy Process?

The Analytic Hierarchy Process (AHP), introduced by Thomas Saaty (1980), is
an effective tool for dealing with complex decision making, and may aid the
decision maker to set priorities and make the best decision. By reducing
complex decisions to a series of pairwise comparisons, and then synthesizing
the results, the AHP helps to capture both subjective and objective aspects of
a decision. In addition, the AHP incorporates a useful technique for checking
the consistency of the decision maker’s evaluations, thus reducing the bias in
the decision making process.

The Multi Criteria Decision Making (MCDM) is a set of techniques (e.g., sum of
weights or conversion analysis) which is able to weight and score a range of
criteria and then the scores are ranked by the expertise and other related
interested groups. The MCDA techniques are spatial in much degree.
To make a decision in an organised way to generate priorities we need to
decompose the decision into the following steps.

1. Define the problem and determine the kind of knowledge sought.

2. Structure the decision hierarchy from the top with the goal of the decision,
then the objectives from a broad perspective, through the intermediate levels
(criteria on which subsequent elements depend) to the lowest level (which
usually is a set of the alternatives).
3. Construct a set of pairwise comparison matrices. Each element in an upper
level is used to compare the elements in the level immediately below with
respect to it.
4. Use the priorities obtained from the comparisons to weigh the priorities in
the level immediately below. Do this for every element. Then for each element
in the level below add its weighed values and obtain its overall or global priority.
Continue this process of weighing and adding until the final priorities of the
alternatives in the bottom most level are obtained.
Features of the AHP:
The AHP is a very flexible and powerful tool because the scores, and therefore
the final ranking, are obtained on the basis of the pairwise relative evaluations
of both the criteria and the options provided by the user. The computations
made by the AHP are always guided by the decision maker’s experience, and the
AHP can thus be considered as a tool that is able to translate the evaluations
(both qualitative and quantitative) made by the decision maker into a multi-
criteria ranking. In addition, the AHP is simple because there is no need of
building a complex expert system with the decision maker’s knowledge
embedded in it. On the other hand, the AHP may require a large number of
evaluations by the user, especially for problems with many criteria and options.
Although every single evaluation is very simple, since it only requires the
decision maker to express how two options or criteria compare to each other,
the load of the evaluation task may become unreasonable. In fact the number
of pairwise comparisons grows quadratically with the number of criteria and
options. For instance, when comparing 10 alternatives on 4 criteria, 4·3/2=6
comparisons are requested to build the weight vector, and 4· (10·9/2) =180
pairwise comparisons are needed to build the score matrix. However, in order
to reduce the decision maker’s workload the AHP can be completely or partially
automated by specifying suitable thresholds for automatically deciding some
pairwise comparisons.

Applications of AHP :
Wide range of applications exists:
 Selecting a car for purchasing
 Deciding upon a place to visit for vacation
 Deciding upon an MBA program after graduation. Etc.
 to Build a Cities Evaluation System
 assessment of Urban Quality of Life

Implementation / Methodology of the AHP:

The AHP can be implemented in three simple consecutive steps:
1) Computing the vector of criteria weights.
2) Computing the matrix of option scores.
3) Ranking the options.
4) Checking the consistency
5) Automating the pairwise comparisons
6) An illustrative example

1) Computing the vector of criteria weights

In order to compute the weights for the different criteria, the AHP starts
creating a pairwise comparison matrix A. The matrix A is m×m real matrix,
where m is the number of evaluation criteria considered. Each entry ajk of the
matrix A represents1 the importance of the jth criterion relative to the kth
criterion. If ajk > 1, then the jth criterion is more important than the kth
criterion, while if ajk < 1, then the jth criterion is less important than the kth
criterion. If two criteria have the same importance, then the entry ajk is 1. The
entries ajk and akj satisfy the following constraint:
Ajk. Akj = 1

Obviously, ajj = 1 for all j. The relative importance between two criteria is
measured according to a numerical scale from 1 to 9, as shown in Table 1,
where it is assumed that the jth criterion is equally or more important than the
kth criterion. The phrases in the “Interpretation” column of Table 1 are only
suggestive, and may be used to translate the decision maker’s qualitative
evaluations of the relative importance between two criteria into numbers. It is
also possible to assign intermediate values which do not correspond to a precise
interpretation. The values in the matrix A are by construction pairwise
consistent. On the other hand, the ratings may in general show slight
inconsistencies. However these do not cause serious difficulties for the AHP.
Once the matrix A is built, it is possible to derive from A the normalized pairwise
comparison matrix Anorm by making equal to 1 the sum of the entries on each column, i.e.
each entry ajk of the matrix Anorm is computed as:

Finally, the criteria weight vector w (that is an m-dimensional column vector) is built by
averaging the entries on each row of Anorm, i.e.

2) Computing the matrix of option scores

The matrix of option scores is a n×m real matrix S. Each entry sij of S represents
the score of the ith option with respect to the jth criterion. In order to derive such
scores, a pairwise comparison matrix is first built for each of the m criteria,
j=1,...,m. The matrix is a n×n real matrix, where n is the number of options
evaluated. Each entry of the matrix represents the evaluation of the i th option
compared to the hth option with respect to the jth criterion. If , then the ith option
is better than the hth option, while if , then the ith option is worse than the hth
option. If two options are evaluated as equivalent with respect to the jth criterion,
then the entry is 1. The entries and satisfy the following constraint:

And for bii (j) = 1 for all i. An evaluation scale similar to the one introduced in Table
1 may be used to translate the decision maker’s pairwise evaluations into
numbers. 1 ( ) = j ii b Second, the AHP applies to each matrix the same two-step
procedure described for the pairwise comparison matrix A, i.e. it divides each
entry by the sum of the entries in the same column, and then it averages the
entries on each row, thus obtaining the score vectors , j=1,...,m. The vector
contains the scores of the evaluated options with respect to the jth criterion. ( j)
B ( j) s ( j) s Finally, the score matrix S is obtained as

i.e. the jth column of S corresponds to . (j) s Remark. In the considered DSS
structure, the pairwise option evaluations are performed by comparing the
values of the performance indicators corresponding to the decision criteria.
Hence, this step of the AHP can be considered as a transformation of the indicator
matrix I into the score matrix S.
3) Ranking the options
Once the weight vector w and the score matrix S have been computed, the AHP
obtains a vector v of global scores by multiplying S and w, i.e.
v=S·w
The ith entry vi of v represents the global score assigned by the AHP to the i th
option. As the final step, the option ranking is accomplished by ordering the
global scores in decreasing order.

Illustrative examples
1. CASE A:
An example will be here described in order to clarify the mechanism of the
AHP. m=3 evaluation criteria are considered, and n=3 alternatives are
evaluated. Each criterion is expressed by an attribute. The larger the value
of the attribute, the better the performance of the option with respect to
the corresponding criterion. The decision maker first builds the following
pairwise comparison matrix for the three criteria:
 2. Case B : Car Selection
 Objective : Selecting a car
 Criteria: Style, Reliability, Fuel-economy, Cost.
 Alternatives : Civic Coupe, Saturn Coupe, Ford Escort, Mazda Miata

Step 1 : Ranking of Criteria and Alternatives

 Pairwise comparisons are made with the grades ranging from 1-9.
 A basic, but very reasonable assumption for comparing alternatives:
 If attribute A is absolutely more important than attribute B and is rated at
9, then B must be absolutely less important than A and is graded as 1/9.
 These pairwise comparisons are carried out for all factors to be considered,
usually not more than 7, and the matrix is completed.
Step 2 : Ranking of priorities

 Consider [Ax = lmaxx] where

o A is the comparison matrix of size n×n, for n criteria, also called the priority matrix.
o x is the Eigenvector of size n×1, also called the priority vector.
o lmax is the Eigenvalue, lmax  > n.
 To find the ranking of priorities, namely the Eigen Vector X:

1) Normalize the column entries by dividing each entry by the sum of the column.

2) Take the overall row averages.

Step 3 : Criteria weights
1. Style .30
2. Reliability .60
3. Fuel Economy .10

Step 4 : Checking for Consistency

1. The next stage is to calculate a Consistency Ratio (CR) to measure
how consistent the judgments have been relative to large samples
of purely random judgments.
2. AHP evaluations are based on the aasumption that the decision
maker is rational, i.e., if A is preferred to B and B is preferred to
C, then A is preferred to C.
3. If the CR is greater than 0.1 the judgments are untrustworthy
because they are too close for comfort to randomness and the
exercise is valueless or must be repeated.

Step 5 : Calculation of Consistency Ratio

1. The next stage is to calculate lmax so as to lead to the Consistency
Index and the Consistency Ratio.
2. Consider [Ax = lmax x] where x is the Eigenvector.
Step 6 : Consistency Ratio

1. Each of the numbers in this table is the average of CI’s derived from
a sample of randomly selected reciprocal matrices of AHP method.
2. An inconsistency of 10% or less implies that the adjustment is small
as compared to the actual values of the eigenvector entries.
3. A CR as high as, say, 90% would mean that the pairwise judgments
are just about random and are completely untrustworthy! In this
case, comparisons should be repeated.

In the above example: CR=CI/0.58=0.03/0.58=0.05

0.05<0.1, so the evaluations are consistent
C) Case C : AHP in project management
Step 1: Evaluation of the weights of the criteria
Step 2: Pairwise comparison matrix for experience

Step 3 : Calculation of priority vector:

Case D : Job Selection Decision

The following is a simple decision examined by someone to determine what kind
of job would be best for him/her after getting his/her PhD: either to work in two
kinds of companies or to teach in two kinds of schools. The goal is to determine
the kind of job for which he/she is best suited as spelled out by the criteria.
Because of space limitations we will not define them in detail here (for more
detail see Saaty, 1994; Saaty and Vargas, 2000) (Figure 1).
There are 12 pairwise comparison matrices in all: One for the criteria with respect
to the goal, which is shown here in Table 3, two for the sub criteria, the first of
which for the sub criteria under flexibility: location, time and work, that is given
in Table 4 and one for the sub criteria under opportunity that is not shown here.
Then, there are nine comparison matrices for the four alternatives with respect
to all the ‘covering criteria’, the lowest level criteria or sub criteria connected to
the alternatives. The 9 covering criteria are: flexibility of location, time and work,
entrepreneurial company, possibility for salary increases and a top-level position,
job security, reputation and salary. The first six are sub criteria in the second level
and the last three are criteria from the first level. We only show one of these 9
matrices comparing the alternatives with respect to potential increase in salary
in Table 5.

In Table 1, the criteria listed on the left are one by one compared with each
criterion listed on top as to which one is more important with respect to the goal
of selecting a best job. In Table 2, the sub criteria on the left are compared with
the sub criteria on top as to their importance with respect to flexibility. In Table
3, the alternatives on the left are compared with those on top with respect to
relative preference for potential increase in salary. The sub criteria priorities in
Table 2 are weighed by the priority of their parent criterion flexibility (0.036) to
obtain their global priority. The priorities for each matrix are obtained as they
were from the matrix of comparisons for the drinks in the USA. In Table 6, the
rankings of the alternatives are given against the nine covering criteria (only one
of the matrices leading to the rankings was given, in Table 5). We need to multiply
each ranking by the priority of its criterion or subcriterion and add the resulting
weighs for each alternative to get its final priority. We call this part of the process,
synthesis. It is given in Table 6. Because Table 6 is horizontally long, it is divided
into two pieces where the lower piece follows to the right of the upper piece.

The overall priorities for the alternative jobs, given on the far right of the lower
piece of Table 6, are the sums across each row for the alternatives. Note that they
sum to 1. These priorities may also be expressed in the ideal form by dividing each
priority by the largest one, 0.333 for International Company, as given in Table 7.
The effect is to make this alternative the ideal one with the others getting their
proportionate value. One may then interpret the results to mean that a State
University job is about 78% as good as one with an International Company and so
on.