A conceptual framework for damage compensation schemes

Damage compensation schemes are widely used to mitigate human-wildlife conflicts. Despite the growing relevance of such conflicts, a theoretical framework to analyze the cost-effectiveness of damage compensation schemes is still missing. The article aims to fill this gap by proposing a conceptual framework by categorizing cost categories, which can be used to compare different types of compensation schemes. To demonstrate the value of the framework, we present an example that compares ex-post compensation and compensation in advance in the European otter (Lutra lutra) in the Upper Lusatia, Germany. We find that the two types of schemes differ widely in their transaction costs. Transaction costs themselves are closely related to the temporal and spatial distribution of damages. Therefore, the choice between the two types of compensation schemes depends on the distribution of damages, which itself depends on the species under concern. Based on this, we recommend a compensation-in-advance type of damage compensation scheme for the otter in the Upper Lusatia, Germany.