Hedonic estimation of housing demand elasticity with a markup over marginal costs

► Recent developments in hedonic pricing theory allow modeling of the equilibrium pricing function as a markup over marginal costs. ► The markup varies inversely with the elasticity of demand at each point on the envelope. ► Results for two districts within Shenzhen, China strongly confirm the main hypothesis of this paper. ► Demand elasticity declines substantially for larger, more luxurious housing units in Shenzhen.