Exploring Decision Making

MSYS335-14A Managerial Decision Making

ASSIGNMENT 3 – Exploring Decision Making

Date Due: MONDAY, 16 June 2014

Junnan Li（1180113）

Decision making is a ubiquitous behavior in human’s life. It’s in political, economic and technological. It in order to achieve a specific goal that according to the possibility of objective, basing on some information and experience, using specific tools and methods to analysis and filtrate the elements which would make influence to achieving goal, at last, choose the most suitable decision for future. This assignment I will do exploring with AHP technique of decision making. I will explain what AHP is and how to use it. Finally, I will give some individual opinions about AHP DM.

AHP technique (Analytic Hierarchy Process) developed by T.L.Saaty in 1970s. It is a combo of qualitative and quantitative, systematization and layering technique of analyzing (Mickel, 2010). Because of its practicability and effectiveness in solving with lots of difficult decision problems, it has been extensively studied and using in a variety of domains around the world, like business, management, transport, education, environment and  distribution of energy and so on(Mickel, 2010). AHP’s system thinking is decomposition at first and then synthesis. It puts the problem as a system. It decomposes the complex problem into different relevant elements, and put these elements into different ordered hierarchies, thereby becoming a multi-hierarchies structure and making principled. In every level, decision makers can compare one couple elements with one couple elements and set up judgment matrix base on a specific rule. Through calculating the value of judgment matrix to make an order for elements, then calculating the weights of all elements in all levels (hierarchies) and make a total order to make sure which element has the biggest weight, finally, using some formula to judge the result of AHP and then make the best project with decision makers’ objective judgment. AHP has 5 steps: explicit problem, establish multi-hierarchical structure, establish judgment matrix, calculating of relative weight and check consistency, and calculating of comprehensive weight. AHP also has three hierarchy structures: completely independent structure, completely relative structure and mixed structure.

I support a simple example with completely relative structure to explore AHP technique. Mr. L wants to buy a new computer, and he does a research for three different brands of computers in market which is brand A, brand B and brand C. Before making decision to buy which one brand, he finds that is difficult to make comparison directly. Because there are a lot of elements cannot be compared. So he only can choose some important value for the rule to comparing, such as strong function, low price and good after-sale-service. Then make a priorities order for these values with A, B, C computer, based on this order to make the final decision. The details at below,

Goal:                          Buy a new computer[pic 1]

[pic 2][pic 3][pic 4]

Criteria:

Strong function      low price   good after-sale-service[pic 5][pic 6][pic 7][pic 8]

[pic 9][pic 10][pic 11][pic 12][pic 13][pic 14][pic 15][pic 16]

Alternatives:

A                B                   C[pic 17][pic 18][pic 19]

The first step is explicit problem: buy a new computer. Then draw a multi-hierarchical structure. Each hierarchy is goal, criteria and alternatives from top level to bottom level. The next step is very important that establish a judgment matrix. In my opinion, this part is similar to Sensitivity analysis technique, which is in order to find the most important element in problem.

C is the evaluation rule: buy a new computer. B is the element, B1 is strong function, B2 is good after-sale-service and B3 is low price.

(

The judgment matrix is using element C as evaluation criteria from last hierarchy to make sure the elements in the next hierarchy base on Pairwise comparisons.

Bij means the weight that element Bi relative to element Bj.

The evaluation standard is: