A network optimization model for budget planning in multi-objective hierarchical systems

This paper presents a planning/budgeting scheme for hierarchical systems. A multi-objective network optimization model for multilayer budget allocation is suggested. The network presents the hierarchical structure of the system. The budget allocations are the flows in the network. Each component in the system (arc in the network) has lower and upper bounds. The model maximizes the additive utility function of the system, expressed as a weighted summation over the preferences of the system’s components in the various levels. The preferences are evaluated by using a multigoal approach, utilizing the Analytical Hierarchy Process (AHP). Finally, the model is conceptually compared with other known budgeting procedures and models, such as ZBB, PBBS and cost benefit analyses.