Dynamic Strategic Optimization Model (DSOM): A Game-Theoretic Framework for Competitive Strategy Under Uncertainty

Strategic decision-making under uncertainty remains one of the most complex challenges facing firms in the 21st century. Traditional qualitative frameworks often fail to provide formal mechanisms for modeling dynamic competitive environments. This paper introduces the Dynamic Strategic Optimization Model (DSOM), a novel analytical framework rooted in stochastic control theory and non-cooperative game theory, designed to guide strategic decisions in uncertain markets. The DSOM formalizes the trade-off between exploration (innovation) and exploitation (efficiency), incorporates behavioral realism through risk-sensitive utility functions, and anticipates competitor behavior using Markov Perfect Equilibrium dynamics. By deriving optimal strategy paths from foundational economic principles, the model provides a structured approach to competitive advantage in volatile environments.