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Multi Criteria Decision Making

Multi Criteria Decision Making. Goal Programming MAUT, Multi Attribute Utility Theory, Keeney & Raiffa 1976 Europe: Electra (Roy et al.) USA : AHP (Saaty). Examples of many criteria. Location Planning Equipment Selection Supplier Selection Evaluation of applicants Ranking Projects

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Multi Criteria Decision Making

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  1. Multi Criteria Decision Making • Goal Programming • MAUT, Multi Attribute Utility Theory, Keeney & Raiffa 1976 • Europe: Electra (Roy et al.) • USA : AHP (Saaty)

  2. Examples of many criteria • Location Planning • Equipment Selection • Supplier Selection • Evaluation of applicants • Ranking Projects • Environmental Evaluation

  3. Environmental Evaluation Criteria • History • Animals • Vegetation • Water System • Landscape • Recreation

  4. Analytic Hierarchy Process • Thomas Saaty 1975 • Expert Choice Software • See www.expertchoice.com • >1500 published references on AHP • Case Studies: • Location • Selecting suppliers • Job candidates evaluation

  5. AHP, pros & cons • Pros: • Doable • Pairwise Comparison • Consistency Index • Cons: • The AHP Scale (1-9) • Many alternatives

  6. AHP methodology • 1. Criteria are compared by importance => weights • 2. Alternatives are scored against each criteria • 3. Final index for each alternative is calculated from weights and scores

  7. The AHP Scale • 1 Equal importance • 3 Moderately more important • 5 Strongly more important • 7 Very strongly more important • 9 Extremely more important

  8. Pairwise Comparison • Wi = Weight of criteria i W1/W1 W1/W2 W1/Wn • W2/W1 W2/W2 W2/Wn • A = • Wn/W1 Wn/W2 Wn/Wn

  9. Consistency Check • 1. Compute A*w’ • 2. M = (1/n)*i(A*w’)i/w’i • 3. CI = (M – n)/(n – 1) • 4. CI/RI > 0,1 => Inconsistency • where n = 2 3 4 5 6 7 8 • => RI = 0 0,58 0,90 1,12 1,24 1,32 1,41

  10. Pareto Efficient Frontier NPV of Profit Alt 2 Alt 5 Alt 3 Alt 4 Alt 1 Environment Impact Index

  11. AHP Example: Locating an Aluminium Smelter in Iceland • Criteria: • Labour, community and service • Harbour, roads and infrastructure • Power, closeness to a power plant • Alternatives: • Keilisnes • Eyjafjörður • Reyðarfjörður • See Excel-document

  12. Master Plan for Hydro and Geothermal Energy • Based on the best available scientific information • Open for democratic public involvement • Large number of proposed power projects were evaluated • Ministry of Industry, in co-operation with the Ministry of the Environment

  13. Steering Committee supported by about 50 experts • Working Group I will evaluate what impact proposed power projects will have on Nature, landscape, geological formations, vegetative cover, flora and fauna, as well as cultural heritage and ancient monuments. • Working Group II will evaluate the impact on outdoor life, agriculture, revegitation, fishing in rivers and lakes, and hunting. • Working Group III will evaluate the impact proposed power projects can have on economic activity, employment and regional development. • Working Group IV will identify potential power projects, both hydro and geothermal, and carry out technical as well as economic evaluation of the projects.

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