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Compensation is a common strategy to alleviate financial losses caused by wildlife, but its effects on farmers' tolerance towards damage to crops caused by wildlife are poorly understood. To address this knowledge gap, we conducted semi-structured interviews in three areas in and around biosphere reserves in Sweden and Germany to examine farmers' appraisals of wildlife-related crop damage and their evaluation of financial compensation in relation to crop damage prevention measures. We found that tolerated yield loss was higher and more variable with compensation compared to a scenario without compensation. Yet, also under a scenario of full financial compensation, farmers tolerated a median of less than 10% yield loss. Using an environmental stress model, our analysis revealed that farmers' perception of crop damage risk was influenced by their experience with wildlife and crop damage, their coping appraisals (e.g. accessibility of prevention measures and compensation), and individual motivations. Our results indicate that while compensation can be effective, its success to increase tolerance to crop damage varies most likely based on farmers' values and how they perceive administrative challenges. Effective management of wildlife-related crop damage near and within protected areas should thus combine compensation schemes with tailored communication and crop damage prevention strategies involving governmental authorities, farmers, and other stakeholders.