Interdisciplinary approaches to identify suitable incentives for enhancing sustainable natural resource use require an analytical framework that satisfies both practical purposes of policy support and disciplinary requirements regarding the specification of underlying technical and behavioural relations. Different approaches for agricultural policy analysis are distinguished according to the nature of problems addressed and the analytical procedures applied. Major drawbacks of more disciplinary analysis can be circumvented through functional integration of these approaches. The methodological foundations of an integrated bio-economic modelling framework for the simultaneous appraisal of agro-ecological and socio- economic parameters are presented, and assumptions on farm household decision making regarding crop and technology choice, labour use, market exchange and price responsiveness are discussed. Implications of this integrated approach are analysed against the background of policy discussions on land markets, incentives for innovation, and public investment for agricultural intensification. Policy analysis for sustainable land use proves to be critically dependent on the specification of the linkages between decision-making procedures regarding resource allocation by farm households and their supply response to changes in the economic and institutional environment.