Attila Inc. wants to take over K&M Inc., Kilgore and Martin's recycled ice cream firm. Kilgore and Martin each own two shares of K&M Inc. (for a total of four shares). The market price of each share is currently $20,000. Attila plans to purchase all the shares of the firm. By bringing in new Georgetown EMBA-educated management, Attila Inc. is certain he can raise the market value to $36,000 per share. Attila offers to pay $40,000 each for the first two shares tendered, but only $20,000 each for the next two shares. If Kilgore and Martin simultaneously tender all their shares, they will evenly split $120,000. If neither tenders, they can jointly eventually sell the company for $144,000 (its expected present value under the new Georgetown EMBA-educated management).

Draw the game that Kilgore and Martin find themselves in normal form.

Does Kilgore or Martin have a dominant strategy?

What is the Nash equilibrium?

Why is Atilla smiling?