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► Homogeneous agents and a monopsony structure can decrease transaction costs.

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In Munich, factors including lack of rural/urban antipathy, homogeneous land use, utilization of well-developed organic standards, and strong demand for organic products decreased transaction costs.

Using existing organic institutions addressed a range of environmental issues simultaneously.

Munich, the capital of Bavaria and the third largest city in Germany, lies on the River Isar on the fringes of the Bavarian Alps.

It began as a monastery, growing into a settlement when the Duke of Bavaria allowed the monks to establish a market at the crossing of the route from Salzburg and the river.

We also benefited from comments at the World Congress of Social Economics meetings (Montreal, June 28–July 1, 2010).

We are particularly indebted to two anonymous referees and the editor of Ecological Economics for suggestions that greatly improved the paper.

► We identify factors affecting transaction costs of contracting for ecosystem services.

► Using existing institutions, such as organic certification, reduces transaction costs.

Laid out around seven large courts, the vast Residenz complex comprises three main sections: the Königsbau, fronting onto Max-Joseph-Platz; the Alte Residenz, facing Residenzstrasse; and the Festsaalbau (Banqueting Hall), overlooking the Hofgarten.

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