Fly now or fly later? The delayed consumption problem

The Analytic Hierarchy Process (AHP) is a decision analysis technique that uses judgements from a group of relevant decision makers along with hierarchical decomposition to derive a set of ratio-scaled measures for decision alternatives. This paper addresses implementation issues for the AHP when the problem is one of assessing delayed vs. immediate consumption. The tradeoff that must be evaluated is the immediate benefit of using one’s limited resources for the purchase or acquisition of a good or service against the delayed benefit of waiting for future purchase or acquisition. The possibility of an increased (or decreased) amount of available resources over time is also allowed for. A technique that combines a dynamic programming algorithm with the AHP approach is developed. Although this paper presents a sample implementation of this technique for the decision of cashing in accumulated frequent flyer points for airline premiums, the technique presented in the paper can be applied to many multiple-critera, time-dependent decision problems such as production-inventory scheduling, investment in new technologies and aggregate planning. The procedure involves prioritizing criteria of the possible alternatives, scoring the alternatives and then comparing the score of an alternative within a time period with the gains that can be accrued through delayed consumption.