AHP based on scenarios and the optimism coefficient for new and risky projects: case of independent criteria

Abstract

AHP is a well-known multi-criteria procedure which has been investigated and developed by many researchers and practitioners. Some AHP modifications are designed for decision making under uncertainty. The goal of this paper is to present a new AHP approach which can be useful in the case of uncertain one-shot decisions and independent criteria. The method proposed in the article is based on scenario planning, features characteristic for the Hurwicz rule (i.e. the use of the optimism coefficient) and on a scenario set reduction. The novel procedure gives the possibility to generate a relatively small number of pairwise comparison matrices thanks to the reduction of the initial sets of scenarios. The modified version of AHP may be helpful when the decision maker’s knowledge about probabilities of the occurrence of particular scenarios is partial. Such a situation occurs in the case of innovative, innovation and risky projects for which historical data are not known. The idea of the suggested scenario-based AHP is to adjust the final choice not only to the decision makers’ preferences (concerning criteria for example), but also to their nature, attitude towards risk, predictions, expectations and fears.