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Nikola's business model involves producing electricity cheaply and then selling the electricity to itself for less than it would pay to purchase electricity from other producers (WSJ, Sept. 2020). Critics might wonder if the firm has the ability to produce electricity cheaper than current producers. A more fundamental question is, "Does the firm maximize profit by selling electricity to itself at below-market prices. The market price is the optimal transfer price when a competitive market exists for the input. Nikola intends to violate this rule. Nikola could increase profit by selling electricity in the market at the market price rather than subsidizing costs of its trucks.
