## 27.6. 27.6 Axiomatic methods

For the sake of simplicity, let's consider that , that is we'd like to solve the conflict between two decision makers. Assume that the consequential space is convex, bounded and closed in , and there is given a point which gives the objective function values of the decision makers in cases where they are unable to agree. We assume that there is such that . The conflict is characterized by the pair. The solution obviously has to depend on both and , so it is some function of them: .

For the case of the different solution concepts we demand that the solution function satisfies some requirements which treated as axioms. These axioms require the correctness of the solution, the certain axioms characterize this correctness in different ways.

In the case of the classical Nash solution we assume the following:

(i) (possibility)

(ii) (rationality)

(iii) is Pareto solution in (Pareto optimality)

(iv) If and , necessarily (independence of irrelevant alternatives)

(v) Be such linear transformation that is positive for and . Then (invariant to affine transformations)

(vi) If and are symmetrical, that is and , then the components of be equals (symmetry).

Condition (i) demands the possibility of the solution. Condition (ii) requires that none of the rational decision makers agree on a solution which is worse than the one could be achieved without consensus. On the basis of condition (iii) there is no better solution than the friendly solution. According to requirement (iv), if after the consensus some alternatives lost their possibility, but the solution is still possible, the solution remains the same for the reduced consequential space. If the dimension of any of the objective functions changes, the solution can't change. This is required by (v), and the last condition means that if two decision makers are in the absolutely same situation defining the conflict, we have to treat them in the same way in the case of solution. The following essential result originates from Nash:

Theorem 27.6 The (i)-(vi) conditions are satisfied by exactly one solution function, and can be given by as the optimum problem unique solution.

Example 27.19 Let's consider again the consequential space showed in Figure 27.3 before, and suppose that , that is it comprises the worst values in its components. Then Exercise (27.44) is the following: It's easy to see that the optimal solution is . Notice that problem (27.44) is a distance dependent method, where we maximize the geometric distance from the point. The algorithm is the solution of the (27.44) optimum problem.

Condition (vi) requires that the two decision makers must be treated equally. However in many practical cases this is not an actual requirement if one of them is in stronger position than the other.

Theorem 27.7 Requirements (i)-(v) are satisfied by infinite number of functions, but every solution function comprises such , that the solution is given by as the optimum problem unique solution.

Notice that in the case of , problem (27.45) reduces to problem (27.44). The algorithm is the solution of the (27.45) optimum problem.

Many author criticized Nash's original axioms, and beside the modification of the axiom system, more and more new solution concepts and methods were introduced. Without expose the actual axioms, we will show the methods judged to be of the utmost importance by the literature.

In the case of the Kalai–Smorodinsky solution we determine firstly the ideal point, which coordinates are: then we will accept the last mutual point of the half-line joining to the ideal point and as solution. Figure 27.18. shows the method. Notice that this is an direction dependent method, where the half-line shows the direction of growing and is the chosen start point.

The algorithm is the solution of the following optimum problem. provided that Figure 27.18.  Kalai–Smorodinsky solution. Example 27.20 In the case of the previous example and . We can see in Figure 27.19, that the last point of the half-line joining to in is the intersection point of the half-line and the section joining to .

Figure 27.19.  Solution of Example 27.20. The equation of the half-line is while the equation of the joining section is so the intersect point: . In the case of the equal-loss method we assume, that starting from the ideal point the two decision makers reduce the objective function values equally until they find a possible solution. This concept is equivalent to the solution of the optimum problem. Let denote the minimal value, then the point is the solution of the conflict. The algorithm is the solution of the (27.46) optimum problem.

Example 27.21 In the case of the previous example , so starting from this point going by the line, the first possible solution is the point again. In the case of the method of monotonous area the solution is given by as follows. The linear section joining to divides the set into two parts, if is a Pareto optimal solution. In the application of this concept we require the two areas being equal. Figure 27.20 shows the concept. The two areas are given by as follows: and where we suppose that defines the graph of the Pareto optimal solution. Thus we get a simple equation to determine the unknown value of .

Figure 27.20.  The method of monotonous area. The algorithm is the solution of the following nonlinear, univariate equation: Any commonly known (bisection, secant, Newton's method) method can be used to solve the problem.

Exercises

27.6-1 Consider that . Be . Use the (27.44) optimum problem.

27.6-2 Assume that the two decision makers are not equally important in the previous exercise. . Solve the (27.45) optimum problem.

27.6-3 Use the Kalai–Smorodinsky solution for Exercise 27.6-1.

27.6-4 Use the equal-loss method for Exercise 27.6-1.

27.6-5 Use the method of monotonous area for Exercise 27.6-1.

 PROBLEMS

27-1 Pareto optimality

Prove that the solution of problem (27.9) is Pareto optimal for any positive values.

27-2 Distant dependent methods

Prove that the distance dependent methods always give Pareto optimal solution for . Is it also true for ?

27-3 Direction dependent methods

Find a simple example for which the direction dependent methods give non Pareto optimal solution.

27-4 More than one equilibrium

Suppose in addition to the conditions of 27.4. that all of the functions are strictly concave in . Give an example for which there are more than one equilibrium.

27-5 Shapley values

Prove that the Shapley values result imputation and satisfy the (27.35)–(27.36) conditions.

27-6 Group decision making table

Solve such a group decision making table where the method of paired comparison doesn't satisfy the requirement of transitivity. That is there are such alternatives for which , , but .

27-7 Application of Borda measure

Construct such an example, where the application of Borda measure equally qualifies all of the alternatives.

27-8 Kalai–Smorodinsky solution

Prove that using the Kalai–Smorodinsky solution for non convex , the solution is not necessarily Pareto optimal.

27-9 Equal-loss method

Show that for non convex , neither the equal-loss method nor the method of monotonous area can guarantee Pareto optimal solution.

 CHAPTER NOTES

Readers interested in multi-objective programming can find addition details and methods related to the topic in the [] book. There are more details about the method of equilibrium and the solution concepts of the cooperative games in the [] monograph. The [] monograph comprises additional methods and formulas from the methodology of group decision making. Additional details to Theorem 27.6 originates from Hash can be found in []. One can read more details about the weakening of the conditions of this theorem in []. Details about the Kalai–Smorodinsky solution, the equal-loss method and the method of monotonous area can found respectively in [], [] and []. Note finally that the [] summary paper discuss the axiomatic introduction and properties of these and other newer methods.

The results discussed in this chapter can be found in the book of Molnár Sándor and Szidarovszky Ferenc [] in details.

The European Union and the European Social Fund have provided financial support to the project under the grant agreement no. TÁMOP 4.2.1/B-09/1/KMR-2010-0003.