The Musk-Twitter dispute end state can surely be worked out using game theory. If they don't settle, there is a probability, p, that the judge rules for specific performance (paying $54 per share) and 1-p just for the $1b penalty. 1/n

We can assume neither Musk nor Twitter want Musk to buy Twitter. Therefore, even if a judge rules for specific performance, they will reach an ex post deal. If Twitter's share price then is $37, that deal will involve Musk paying Twitter, $17/2 or $8.5 a share or $13b . 2/n

We can use a standard method (as documented in @BarryNalebuff new book, Split the Pie www.amazon.com/Split-Pie-Radical-New-Negotiate-ebook/dp/B096T1NCW4/ref=sr_1_1?keywords=splitting+the+...) to see what an ex ante settlement will bring. Ignoring the court costs (small relative to the stakes here), Musk faces an expected payment of p$13b + (1-p)$1b. 3/n

Given this, Musk and Twitter will be expected to settle, the day before the trial, for $500m + p$6b. Many people think p is quite high so an upper bound on Musk's payment would be $6.5b and a lower bound is $0.5b. 4/n

But I suspect Musk is far more patient than Twitter as Twitter will end up with Twitter anyway and so will want to avoid what may be months or years of disruption and uncertainty that pushes the share price down. (Although that may impact the expected settlement with Musk too). 5

Thus, I suspect a reasonable settlement if we were to "jump to the equilibrium" is something on the order of $5b. 6/6