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Bargaing power in apartment sales in Corsica : A latent class approach

Steven B. Caudill, Claudio Detotto, Dominique Prunetti


This paper adds to the literature by extending the bargaining model of Harding, Rosenthal, and Sirmans (2003) to a latent class framework. We examine data on apartment sales in Corsica over the period 2006 to 2016. Our results indicate that the Corsican housing market has two distinct segments and that bargaining power of buyers and sellers is not the same in these two segments. In particular, we find that the French mainlanders have more bargaining power when selling in one market segment but they experience a decrease in bargaining power when buying in the other segment. Corsican buyers exhibit significant bargaining power in both sub-markets but local sellers exhibit significant bargaining power in just one segment of the market. Auxiliary regressions indicate that the apartments associated with the first segment are more spacious, less likely to be new, more likely to have a garden, and typically have longer travel times to any of the local amenities like doctors, pharmacies and the downtown area. From this we conclude that apartments in one segment are more likely to be rural and at a greater distance from the coast compared to the other segment.

Keywords : Latent class, hedonic regression, bargaining power

Working Paper TerRa n°11