Multiple-criteria decision making

Introduction

In this example a company should prefer product B's risk and payoffs under realistic risk preference coefficients.

Multiple-criteria decision-making (MCDM) or multiple-criteria decision analysis (MCDA) is a sub-discipline of operations research that explicitly evaluates multiple (often) conflicting criteria in decision making in complex dynamic systems. Humans are exposed to decision making both in daily life (e.g. social interactions) and in settings such as business, government, medicine, education, .... It is also known as multi-attribute decision making (MADM), multiple attribute utility theory, multiple attribute value theory, multiple attribute preference theory, and multi-objective decision analysis.

Conflicting Criteria

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.

Ethical conflicts

The most economical solution might have beside an environmental impact also a public health side effect, where small group of people are exposed to a specific risk. Possible questions in this ethical context are:

• how much does the optimization for the most economical solution imply ethical implication?

Return of investment - Risk reduction

In portfolio management, managers 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. If there are different groups A and B and A is benefiting from a higher risk while B has to deal with higher risks without benefiting to much, leads of a conflict of interest.

Customer satisfaction and Cost

In a service industry, customer satisfaction and the cost of providing service are fundamental conflicting criteria, due to the fact an improved customer services increases the costs for the services.

Daily Lives - Multiple criteria decisions

In their daily lives, people usually weigh multiple criteria implicitly and 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

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.

Learning activity - Unified Modelling Language

• Explain the role of Unified Modeling Language (UML) to decompose a complex problem into components and identify interactions.
• UML-Model support the implementation of a Decision Support System for Health!
• Apply the UML modeling to the domain of your expertise and identify the components of the considered system, the interactions between the components and use-cases of the identified components.
• Allocate the criteria in the decomposition of the components with 3 domain (economy, environment and human health).

Learning Activities

• Look at Large Language Models and support bots that help customers to find there way through the possible service options of a company, university or service center in general.
• Discuss different conflicting criteria.
• Pick up the role of different stakeholders in a team and argue with perspective of the role you take over.

Sustainable Development Goals - SDG

Explore the Background of SDGs and the 17 Sustainable Development Goals and identify applications of multiple-criteria decision making.

Spatial Problems

Benefits and risks can have spatial attributes, so that risks were allocate in specific areas while the benefits are allocated in other areas. Apply that to the management of water resources that requires multiple-criteria decision making.

See also

• Decision-making software
• Risk Literacy
• Risk Management
• Spatial Decision Support System
• Swarm intelligence

Page Information

Wikipedia2Wikiversity

This page was based on the following wikipedia-source page:

• Multiple-criteria decision analysis https://en.wikipedia.org/wiki/Multiple-criteria%20decision%20analysis
• Datum: 6/8/2026
• Wikipedia2Wikiversity-Converter: https://niebert.github.io/Wikipedia2Wikiversity