(defvar star-state :no-stars)
(defun star-electric ()
  (cond
   ((and (eq this-command 'self-insert-command)
         (eq last-command-event ?*)
         (eq star-state :no-stars))
    (setq star-state :one-beg-star))
   ((and (eq this-command 'self-insert-command)
         (eq last-command-event ?*)
         (eq star-state :one-beg-star))
    (progn (insert "**")
           (backward-char 2)
           (setq star-state :two-beg-stars)))
   ((and (eq this-command 'self-insert-command)
         (eq last-command-event ?*)
         (eq star-state :two-beg-stars))
    (progn
      (setq star-state :one-end-star)
      (when (looking-at "\s-*\*")
        (delete-char -1)
        (search-forward "*"))))

    ((and (eq this-command 'self-insert-command)
          (eq last-command 'self-insert-command)
          (eq last-command-event ?*)
          (eq star-state :one-end-star))
     (delete-char -1)
     (forward-char 1)
     (setq star-state :no-stars))))

(add-hook 'post-self-insert-hook 'star-electric)