The MOORA method and its application to privatization in a transition economy

Abstract

A new method is proposed for multi-objective optimization with discrete alternatives: MOORA (Multi-Objective Optimization on the basis of Ratio Analysis). This method refers to a matrix of responses of alternatives to objectives, to which ratios are applied. A well established other method for multi-objective optimization is used for comparison, namely the reference point method. Later on, it is demonstrated that this is the best choice among the different competing methods. In MOORA the set of ratios has the square roots of the sum of squared responses as denominators. These ratios, as dimensionless, seem to be the best choice among different ratios. These dimensionless ratios, situated between zero and one, are added in the case of maximization or subtracted in case of minimization. Finally, all alternatives are ranked, according to the obtained ratios. Eventually, to give more importance to an objective, an objective can be replaced by different sub-objectives or a coefficient of importance can be specified. An example on privatization in a transition economy illustrates the application of the method. If application is situated originally in a "welfare" economy, centered on production, MOORA becomes even more significant in a "wellbeing economy", where consumer sovereignty is assumed.