A Field Experiment with Tradable Development Rights in Germany Jens E. M¨ uller 1 , Stefan Seifert 1 , Karl-Martin Ehrhart 1 , Katrin Ostertag 2 , and Joachim Schleich 2 1 Karlsruhe Institute of Technology 2 Fraunhofer Institut System- und Innovationsforschung June 25, 2010 Abstract Within its Strategy for Sustainability, the German Federal Government aims to reduce the land utilization to a maximum of 30 hectare per day in 2020. From an economic perspective, market-based-instruments such as cap-and-trade schemes are promising policy mechanisms to achieve this goal efficiently. Market-based instruments are relatively new mechanisms for the management of natural resources and the environment, for which regulatory approaches have largely failed. Recent case studies have re- vealed that the implementation of such a cap-and-trade scheme is very complex. This paper reports on a first national controlled field experiment in- cluding real planners of 14 German municipalities to test a trading scheme in Germany. Based on their current data, the participating municipali- ties as well as a student control group simulated the period from 2008 to 2022 under the rules of a cap-and-trade system. The study reveals that the total incomes of the municipalities for reaching the target can be higher in the cap-and-trade system than in a comparable command- and-control system. Nevertheless, both the experts from the field and the student control group failed to reach the theoretical optimum. Especially the complexity of the trading system and the design of decision support tools are linked to the market outcome. An extensive preparatory phase for practical decision makers in municipal administrations is needed to assure sufficient competence and acceptance for the new instrument. 1 Introduction In Germany, there is an ongoing conversion of agricultural land into residential and commercial uses. Negative ecological and economic consequences arising out of this trend compromise the ecological function of space as a resource for humans, animals, and plants. A crucial factor for the continuous land con- sumption is the problematic financial situation in many municipalities (J¨ orissen and Coenen, 2007). The development of new settlement areas in the outer area 1