Hi. In this lecture we're going to talk about a type of decision making known as

multi-criterion decision making. And the idea here is that there's lots of

different dimensions and you've got a couple choices, and you're trying to

figure out which choice, you know, sort of makes you happy, which choice you think is

sort of the better of the two or three or four, right? So how does this work? We're

going to do this in two ways, we're going to do first, do it qualitatively. And then

we'll do it quantitatively. So, let's do a qualitative assessment first. By that I

just mean just sort of no numbers, right? It just means sort of like, which is

better? Lets suppose you're looking at a house. [laugh] This is a very small house,

but let's suppose you're looking at a house, and you're trying to decide, you

know, should I buy this house, or there's some other house down the street and I'm

also looking at that. Now, if you think about making that sort of decision, a

house has all sorts of dimensions to it, right? So there's square feet, there's the

number of bedrooms, there's number of bathrooms, there's the lot size. There's

the location. There's the condition of the house. There's all these things. So, If

you sit there and you go through one house and you go through the other house and you

try to keep all these things in your head, that can be really, really complicated. So

one way to do multi-criterion decision making is just to say okay let's just

create a chart like this. Let's create the following model where these are the

dimensions right here. These are all the dimensions I'm gonna decide on. And then

for each house, right, house one and house two, I have a column. So now, what I can

do is I can write down the square footage of these houses. So I could say this house

is maybe 2,000 square feet and this house is 1,800 square feet. Right? And number of

bedrooms. I could say maybe this house has four bedrooms and this house has three

bed, bedrooms. So, house one is sort of bigger with more bedrooms, but house one

may only have one one-half bathrooms where as house three, house two has three

bathrooms. Now look at the lot size. It may be this one is only a quarter acre.

And this one is a half acre. Right? And then I look at the location, and the

location, now this, maybe, maybe I put miles from work. Maybe this is ten miles

from work, and maybe this is fifteen miles from work. And the last I can ask okay

what's the condition of the house? And maybe this one. Is excellent, and this one

is only good. What I would like [inaudible] these criteria and say, okay,

which one wins, right? So, what I can do is I can say, okay, well, on square

footage this one wins, on bedrooms this one wins, on bathrooms house two wins, on

lot size house two wins, on location, cuz this is distance to work, house one wins,

and on condition of the house, house one wins. So what I get is that house one gets

a total of four, and house two gets a total of two, [cough] so if I can deduce

anything and say, well look, house one seems like a better house, right? Because

it, it wins on four of the six criteria. And this is a way, you know, one way to

make decisions. You can do this on other issues as well. A few years ago the state

of Michigan had a referendum called the Michigan Civil Rights Initiative, and this

essentially, was a referendum saying that state employees, you know, state employers

including universities could not give preferential treatment to women or

under-represented minorities. So what I did with Liz Suhey, who was a grad student

at the time at the University of Michigan, was we put together a, a decision theory

guide for people to help make this decision. So what we did, is for each of

the different dimensions of this issue, how it was going to affect things like.

Equality, the quality of education, help or harm women, social cohesion, reward

merit and whether it was an appropriate limit or not. We wrote a guide that sort

of laid out. The argument for mcri and against the mcri. And then what a person

could do is they could go down each of these dimensions and say I'm in favor of

the mcri or I'm against it, right, and so on and then count up the columns and say

okay there's four reasons why I should support it, and two reasons why I should

be against it, where alternatively someone might read through these things and say

well on every one of these dimensions I think we should reject the mcri and vote

against it. So what this was, is this was a guide to help people recognize the

dimensions, weight the alternatives along those two dimensions, and then make

hopefully more informed choices. So if you think about how you vote or how you buy a

house, this can be really a useful way, because there are so many dimensions,

right? What you do is just lay out each dimension. Put columns for the

alternatives, and then decide which alternative is better on which dimension,

and then add those up and make a choice. So let's go back to our house case. So I

do this, I put down all the criteria, and I, you know, list house one and house two,

and then it says, okay, you know, I should buy, if you're doing this, right, remember

we came down and we had four reasons why I should buy house one and two reasons why I

should buy house two, and I say, okay, therefore I'm buying house one. Suppose I

do that and I don't like house one [laugh]. I've done different houses and I,

in my gut, I say you know what, I don't like house one. I really like house two.

Well it's a couple things going on. One is maybe I'm missing some criteria. Maybe

house two is a Spanish style house and house one is a Craftsman house and what I

really like is Spanish style houses. Well, if that's the case, right? What I should

do is go back to my criteria and add Spanish style house. But if I do that,

that's still only going to make it four to three. Well, what can I do then? Well, one

thing I can do then is I could say, well, do I really like house two? [laugh] Right,

is it really the case I like two or is there, is there something [inaudible]

irrational in what I'm doing? Is this, is it some sort of romantic attachment to

house two, when in fact, when I look at it somewhat objectively according to the

criteria that I care about, house one is better? Well, another way we can go, more

sophisticated multi-criterion decision-making model, is to take into

account quantitative weights, right, to not only just take into account

qualitatively which is better, but actually quantitatively, to measure the

differences. So what do I mean? So now I can say okay, here's all these things I

care about, right? And let's suppose now that I've added in here that I also care

about the basement. So now, there's house one and house two and maybe again house

one wins on square feet, number of bedrooms but it doesn't win on bathrooms

or lot size and it wins on lot location and condition, but suppose house two wins

on basement, right? And before I had this total of. Four to three. But it could be

that you know, square footage doesn't matter to me that much. Nor does number of

bedrooms so go, give each of these one. But number of bathrooms matters to me two.

And lot size matters to me too. Location and condition don't matter to me very

much, and having a basement is incredibly important. Well now. If I do this, house

one gets a total of one, two, three, four. Right? And house two gets a total of two,

four, six. And so now, it's house two. And so what I see is, okay, what really was

going on here is that when I put in how much I care about these dimensions, I

realize that's the reason why in my gut, I sort of felt that house two was better.

Now again, let's think about this one. Remember we talked about, we don't want to

let the models tell us what to do. We want the models to help us make better choices.

So if I'm buying a house and I write down all the criteria, and I compare two

houses. And I see boy, [laugh], according to my very, my own criteria, house one is

better than house two, but in my heart of hearts, I prefer house two. That doesn't

mean we shouldn't buy house two. But it does mean we should ask ourselves are

there, are there criteria we're leaving out, or other weights? So we can at least

understand ourselves and know why we're making the choice. And that, no we're not

making it because you know, perhaps we liked. The blue curtains in the living

room or something, right? So, it helps us make more rational choice. So, that's sort

of normatively why these things are so useful. Positive way too, because when you

see somebody else buy a house. When you see, boy house one was better on every

dimension except for lot size. We can then infer, well, this is someone who cares a

lot about lot size. Okay. There we go. So that's it. Multi-criterion decision

making. What you do is you list all your criteria, take your alternatives and you

see which one wins in each, on each criteria. Now you can also add weight to

make it more quantitative so some criteria matter more than others. Again, two ways

we can use it. One is make better choices ourselves, right? We just saw how when

we're make, deciding like whether to buy a house or how to vote this can be real

useful, and second we can use them to understand the choices of others. Thank