MULTICRITERIA APPROACH TO PROSPECT THEORY: FUNDAMENTALS AND APPLICATION

ABSTRACT This paper compares the use of two multicriteria decision analytical methods used for military material selection. In the decision analysis the Analytic Hierarchy Process - AHP was initially used first in order to rank the alternatives in the presence of multiple criteria. This study was conducted in the Army Evaluation Center, a unit of the Brazilian Army. The other decision analysis method employed was TODIM, which is based on Prospect Theory, thus allowing to take risks into account in the modeling stage. Although the two multi-criteria methods rely on different decision paradigms, this application study showed that results were quite similar to justify the use of either method in the practice of similar military decisionmaking processes.