MCDA methods in decision making

Abstract

Decision making is one of the most important parts of any aspect of life. It affects the present and both immediate and long-term future. Of course, it has a huge impact on every project, naturally including engineering projects. There is a vast number of techniques and methods to help one to come up with a final decision. In this article, the focus is the MCDA analysis in decision makin. In decision making, there are different tools or criteria, such as Cost - Benefit Analysis (CBA) or the Multi Criteria Decision Analysis (MCDA). On one hand, CBA focus on the quantitative part of the project in order to reach a decision, specially focusing on monetary terms, currency change and various rates, such as inflation or consumer surplus. On the other hand, MCDA involves many other criteria, mostly qualitative, in order to reach a decision. Within MCDA, naturally, there are different techniques to use, the two main ones are AHP and Smart. As mentioned previously, the focus of this paper will be the MCDA methods in decision making. Initially, there will be an introduction on the history of the decision making and where the term comes from. Sequentially, there will be an explanation on both CBA and MCDA to reach a full understanding for both tools and comparing them. After this section, there will be a deeper explanation on the MCDA analysis, explaining the different types of MCDA and providing examples, pros and cons. Finally there will be a conclusion on the involvement of MCDA analysis and methods in the decision making, focusing on engineering projects.

Introduction

History of Decision Making

During the middle of the last century, Chester Bernard created the term "decision making". It was intended to ve a replacement and a narrower descriptor for "resource allocation and policy making". Additionally, it was an intended term for how managers though about what decisions to make at a certain time. Also, William Starbruck, proffesor in University of Oregon clearly stated that "Decision implies the end of deliberation and the beggining of action."

Barnard along with others such as James March, Herbert Simon and Henry Mintberg laid the foundation for the study of managerial decision making. It tried to find answers to the questions of who makes decisions, and how. The study of decision making involves a numerous amount of disciplines such as mathematics, sociology, psychology, economics, etc. It also investigated different risk and organizatoinal behaviours in relation to achieving the best outcome.

A big participant of Decision Making is risk analysis, which has evolved vastly throughout the years. It was not until World War I that risk was examiend with economic analysis, thanks to Frank Knight in 1921. Knight distinguished between risk, when the probability of an outcome is possible to calculate and an uncertainity, when the porbabilty of that outcome is unknowable. Nowadays, thanks to technology, Internet and Artificial Intelligence, tools have been created in order to improve the decision making techniques and its outcomes.

Types of Decision Making tools

The main two analysis tools in the Decision Making enviroment are Cost - Benefit Analysis and Multi - Criteria Decision Analysis. In this article, the focus will fall on MCDA.