MGMT20005 Multi-Criteria Decision Making Flashcards

Vocabulary flashcards covering key multi-criteria decision-making concepts, including scoring models and the Analytic Hierarchy Process (AHP), based on MGMT20005 Lecture 4.

Multi-Criteria Decision Problem (MCDP)

A decision situation in which an evaluator uses more than one criterion or objective, often involving conflicting criteria, to evaluate decision alternatives.

Scoring Model

A multi-criteria decision-making method in which decision-making criteria are listed, assigned weights based on importance, and used alongside alternative ratings to compute weighted average scores for ranking alternatives.

Weighted Average Score ($s_j$)

The total evaluation score for decision alternative $j$ in a scoring model, calculated as $s_j = \sum_i w_i r_{ij}$, where $w_i$ is the weight of criterion $i$ and $r_{ij}$ is the rating of alternative $j$ for criterion $i$.

Analytic Hierarchy Process (AHP)

A structured technique designed to quantify managerial judgments of the relative importance of several conflicting criteria and establish priority rankings for decision alternatives using pairwise comparisons.

AHP Fundamental Scale

A 9-point scale used in pairwise comparisons where $1$ indicates equal preference, $3$ moderate preference, $5$ strong preference, $7$ very strong preference, and $9$ extreme preference, with $2, 4, 6, 8$ as intermediate ratings.

Pairwise Comparison Matrix

A matrix in AHP capturing relative preferences between pairs of criteria or alternatives, where diagonal values equal $1$ and element $a_{ij} = \frac{1}{a_{ji}}$ represents reciprocal preference.

Synthesisation

The process in AHP used to calculate the priority vector by summing column values of a pairwise comparison matrix, dividing each entry by its column sum to create a normalized matrix, and averaging each row.

Consistency Index ($CI$)

A quantitative measure of judgment consistency in AHP defined by the equation $CI = \frac{\lambda_{\max} - n}{n - 1}$, where $\lambda_{\max}$ is the average value of the weighted sum vector divided by the priority vector, and $n$ is the matrix size.

Random Index ($RI(n)$)

The average consistency index calculated from randomly generated pairwise comparison matrices of size $n$, used as a baseline to evaluate the consistency of decision-maker judgments.

Consistency Ratio ($CR$)

A metric in AHP computed as $CR = \frac{CI}{RI(n)}$; a value less than $0.10$ indicates acceptable consistency, whereas a value greater than $0.10$ signifies untrustworthy judgments requiring re-evaluation.

Overall Priority Ranking

The final ranking score vector for decision alternatives in AHP, derived by multiplying the criteria priority vector by the matrix of decision alternative priority scores.