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Multiple-criteria decision analysis

Multiple-criteria decision-making (MCDM) or multiple-criteria decision analysis (MCDA) is a sub-discipline of operations research that explicitly evaluates multiple conflicting criteria in decision making (both in daily life and in settings such as business, government and medicine). Conflicting criteria are typical in evaluating options: cost or price is usually one of the main criteria, and some measure of quality is typically another criterion, easily in conflict with the cost. In purchasing a car, cost, comfort, safety, and fuel economy may be some of the main criteria we consider – it is unusual that the cheapest car is the most comfortable and the safest one. In portfolio management, we are interested in getting high returns while simultaneously reducing risks; however, the stocks that have the potential of bringing high returns typically carry high risk of losing money. In a service industry, customer satisfaction and the cost of providing service are fundamental conflicting criteria. Multiple-criteria decision-making (MCDM) or multiple-criteria decision analysis (MCDA) is a sub-discipline of operations research that explicitly evaluates multiple conflicting criteria in decision making (both in daily life and in settings such as business, government and medicine). Conflicting criteria are typical in evaluating options: cost or price is usually one of the main criteria, and some measure of quality is typically another criterion, easily in conflict with the cost. In purchasing a car, cost, comfort, safety, and fuel economy may be some of the main criteria we consider – it is unusual that the cheapest car is the most comfortable and the safest one. In portfolio management, we are interested in getting high returns while simultaneously reducing risks; however, the stocks that have the potential of bringing high returns typically carry high risk of losing money. In a service industry, customer satisfaction and the cost of providing service are fundamental conflicting criteria. In our daily lives, we usually weigh multiple criteria implicitly and we may be comfortable with the consequences of such decisions that are made based on only intuition. On the other hand, when stakes are high, it is important to properly structure the problem and explicitly evaluate multiple criteria. In making the decision of whether to build a nuclear power plant or not, and where to build it, there are not only very complex issues involving multiple criteria, but there are also multiple parties who are deeply affected by the consequences. Structuring complex problems well and considering multiple criteria explicitly leads to more informed and better decisions. There have been important advances in this field since the start of the modern multiple-criteria decision-making discipline in the early 1960s. A variety of approaches and methods, many implemented by specialized decision-making software, have been developed for their application in an array of disciplines, ranging from politics and business to the environment and energy. MCDM or MCDA are well-known acronyms for multiple-criteria decision-making and multiple-criteria decision analysis; Stanley Zionts helped popularizing the acronym with his 1979 article 'MCDM – If not a Roman Numeral, then What?', intended for an entrepreneurial audience. MCDM is concerned with structuring and solving decision and planning problems involving multiple criteria. The purpose is to support decision-makers facing such problems. Typically, there does not exist a unique optimal solution for such problems and it is necessary to use decision-maker's preferences to differentiate between solutions. 'Solving' can be interpreted in different ways. It could correspond to choosing the 'best' alternative from a set of available alternatives (where 'best' can be interpreted as 'the most preferred alternative' of a decision-maker). Another interpretation of 'solving' could be choosing a small set of good alternatives, or grouping alternatives into different preference sets. An extreme interpretation could be to find all 'efficient' or 'nondominated' alternatives (which we will define shortly).

[ "Operations management", "Operations research", "Mathematical optimization", "Management science", "best worst method", "multi criteria decision", "VIKOR method", "Stochastic multicriteria acceptability analysis", "ELECTRE" ]
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