Multicriteria Analysis

– multicriteria analysis as a method for project

evaluation
– Multicriteria analysis takes also non monetary
effects into account
– Illustration with an example
 1. Limitations in cost-benefit
analysis
• CBA is based on the knowledge of all the
costs and benefits that are linked to the
project, and expressed in monetary values
• Some costs and benefits are difficult to
express in money, because they don’t
have a price (intangible costs and
benefits), for example (-) air pollution by cars,
(+) attractiveness of the agricultural landscape,
…
• multicriteria analysis takes into account
both tangible and intangible costs and
benefits: balance of effects expressed in
different units is possible
• The decision is based on different criteria
(for example: environment, economics, …)
each with their own weight (one criteria
can be more important than another one)
 2. Basic principles of MCA
• Multicriteria analysis:
– Method for the comparison of different
alternatives that are evaluated for different
criteria
– Is based on pare wise comparison of
alternatives
– an alternative is preferred to another
alternative if it scores enough better than the
other alternative in the majority of the
(important) criteria
 3. Method
• Step 1
– per criteria, express the relative difference
between the alternatives by preferential
functions (6 types); in this way, criteria can be
compared
• Step 2
– Express the importance of criteria by
attributing weights
– the following formula can be used:
n
1
gj =∑
i =k i

k = the rang order of the criteria j (with k=1 for the most
important and k=n for the least important criterium)
• Step 3
– aggregation by calculation of the preferential
indicators
P ( a, b ) = ∑ g j [ ê j ( a, b ) ]
1
– Preferential indicators
n

met êj(a,b) = f(ej(a) - ej(b)) if a >j b

=0 if a ≤j b
ej(a) = score of alternative a for criterium j
ej(b) = score of alternative b for criterium j
gj = relative weight of criterium j
n = total number of criteria
• Step 4
– comparison preferential indicators:
P of >>> if P(a,b)>>>P(b,a) – strong preference
p of > if P(a,b) > P(b,a) – weak preference
I if P(a,b) = P(b,a) and both indicators have low
values - indifference
R if P(a,b)=P(b,a) but both indicators have high
value – incomparable
Determination via PIR-filter (threshold value)
• Step 5
– Determination of the order of the alternatives
on basis of:
• or PIR relation (if order is desired)
• Or determination of a distance index (if further
analysis is desired) - distance index determines
the position of the alternative in min-max interval
(pareto efficiency alternatives)
• Step 6:
– Conclusions on basis of outcome and
sensitivity analysis:
• Uncertainty with respect to alternatives
• Criterium study
• Preference uncertainty
• Uncertainty of estimation
 4. Example

• Train connection between 2 places

– Split the distance between the places into
homogeneous zones (14 zones)
– definition of evaluation criteria
– evaluation of the zones on basis of
quantitative en qualitative scale
– identification of all possible connections
between the zones
– evaluation of each route
– Comparison of possible routes
Possible roads
Alternative Sequence of zones
A1 1-2-6-9-13-14
A2 1-2-6-9-11-12-14
A3 1-2-5-9-13-14
A4 1-2-5-9-11-12-14
A5 1-2-5-8-10-12-14
A6 1-2-5-8-11-12-14
A7 1-2-5-7-10-12-14
A8 1-2-5-7-11-12-14
A9 1-3-5-9-13-14
A10 1-3-5-9-11-12-14
A11 1-3-5-8-10-12-14
A12 1-3-5-8-11-12-14
A13 1-3-5-7-10-12-14
A14 1-3-5-7-11-12-14
A15 1-3-4-8-10-12-14
A16 1-3-4-8-11-12-14
A17 1-3-4-7-10-12-14
A18 1-3-4-7-11-12-14
 5. Conclusions
• Multicriteria analysis is a useful instrument
for support of decision with regard to
projects en investments
• advantages:
– Different criteria can be taken into account
– Non monetary values can be taken into
account
• disadvantages: quiet complex when
different alternatives are possible