Thursday, September 4, 2008

Why pairwise comparisons are a waste of time for finding criteria importance

Many people use pairwise comparisons during their decision making efforts. First, this method may be used to determine the relative importance (the weightings) of the criteria. Second, pairwise comparisons are sometimes used to evaluate the alternatives relative to the criteria. BOTH OF THESE ARE A WASTE OF TIME!! Don’t get me wrong, I think pairwise comparisons can be helpful, just that there are faster ways of getting virtually the same results. In this brief note I will only tackle why you shouldn't bother for finding importance.

Through his books and companies, Tom Saaty has popularized pairwise comparisons as a part of his Analytic Hierarchy[1] (AHP) and Analytic Network[2] Processes In the Analytic Network Process book, on pages 26- 31, Saaty gives the example of using eight criteria to help select a house (e.g. Size of House, Transportation, Neighborhood, etc). His method requires that all the criteria be compared to each other one pair at a time to find the most important for each comparison. Further, a dominance factor is given to the better of the pair relating how much more important one factor is to another. If working with a team, they need to come to agreement on the dominance factors (I will come back to this point later). For the 8 criteria, there are 28 comparisons and the need to judge 28 dominance factors. In general, for N factors there are (N-1) + (N-2) +…. 1 comparisons.

For the example in his book (where the numbers represent the 8 criteria (i.e. factors)) a matrix of the pairwise comparisons is a shown below. Note that the opposite entries are just reciprocals of each other. Criterion 1 is 5 times as important as criterion 2 and so criterion 2 is 1/5 as important as criterion 1.

matrix of the pairwise comparisons
The Priority Vector is reduction of the values (using an eigenvector analysis) to develop the relative weightings - the importance of each criterion.

Compare this to a method proposed by Ward Edwards, one of the fathers of modern decision theory. He suggested that asking decision makers to weigh criteria is so fraught with error that it is easier, and no less accurate, just to ask them to rank the criteria and then automatically set the weights according to the ranking[3]. This “error” is exasperated when there are multiple constituencies represented in the organization.

Find the rank order the criteria, write each criterion on a sticky note and arrange them on a wall or desk, and reorder with the most important on top. This is best done in a pairwise fashion by selecting the criteria two at a time and asking, “If an alternative could meet only one of these, which criteria would I choose?” Then, move the chosen one to the top and the other to the bottom of the arrangement.

You can convert the ranking to a weighting by using the table below. This table shows the Rank Order Centroid (ROC) method developed by Edwards and shows the weights for up to 12 criteria.

Rank Order Centroid table
Weights based on ROC method

If you have more than 12 criteria, you can use the equation wk= (1/K) ∑ (1/ i ) as i goes from k (the number of the criterion, with 1 being the highest weighted and K being the lowest) to K (the number of criteria). This equation was used to generate the values in the table. The values for 8 criteria are shaded in the table above and plotted below compared to the pairwise method.

The results of the two methods are shown on the bar chart below.

decision method comparison graph
The Mean Absolute Error between the two (the sum of the absolute differences between the two) is, on average, 2%. Other examples I have tried have even had less error. Considering that there is no right answer and that one change in pairwise comparisons can change the results. The difference between the two comes at the expense of a major difference in the amount of effort. Twenty eight comparisons and assignments of priorities versus simply rank ordering the criteria.

Now, adherents of pairwise comparisons can argue that the method also computes consistency, a measure of how well the many dominance factors agree with each other. I believe this is of little importance as the dominance factors are just averages across a committee of stakeholders who are trying to quantify subjective values. In other words, the uncertainty in the pairwise scoring is so high due to averaging and quantifying subjective values that consistency in the dominance factors is just noise. Consistency analysis gives false comfort that the matrix is consistent when the numbers themselves are very uncertain.

Based on the above arguments, I believe pairwise comparisons are a waste of time. I prefer to allow all the stake holders to rank order and use the resulting inconsistent weighting factors in my analysis. Thus, I honor all party’s values and use them all in downstream analysis. More on this in another note.

[1] Decision Making for leaders: The Analytic Hierarchy Process for Decisions in a complex World, Thomas L. Saaty,RSW Publications, Pittsburgh PA, 1999
[2] The Analytic Network Process, Thomas L. Saaty, RWS Publications, 1996.
[3] Edwards, Ward and F. Hutton Barron, "SMARTS and SMARTER: Improved Simple Methods for Multi-attribute Utility Measurement" and F. Hutton Barron and Bruce Barrett, "Decision Quality Using Ranked and Partially Ranked Attribute Weights."

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