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Cocoa agroforestry systems (CAFS) exhibit considerable variation in shade-tree management, defined by farmers' decisions to retain or remove shade trees. Yet, empirical evidence on the economic implications of shade-tree management remains limited, and few studies offer a multidimensional economic assessment. This study examines the effect of shade-tree density on the economic performance of CAFS in southern Bahia, Brazil. Using data from 313 cocoa-farming households, we combine household-level economic data with ecological field measurements from CAFS plots. We apply Ordinary Least Squares regressions and a coefficient stability approach to assess the effects of shade-tree density on cocoa yield, cocoa production costs, net cocoa income, revenues from other agroforestry crops, and overall returns from CAFS. Results indicate that higher shade-tree densities are associated with lower cocoa yields, but reductions in production costs partly offset these losses, limiting their effect on net cocoa income. Revenues from other crops also decline with increasing shade-tree density, providing insufficient economic benefits to improve overall returns. However, even substantial increases in shade-tree density involve only limited economic trade-offs. The losses are more pronounced in larger CAFS, whereas smaller CAFS appear better able to mitigate productivity losses and sustain returns under higher shade-tree densities. As shade trees provide substantial ecological benefits, policies should therefore prioritise financial incentives that reward farmers for maintaining shade trees in CAFS. These incentives are particularly relevant in the current policy context promoting cocoa production. Emphasizing conservation-oriented mechanisms would better align farm-level economic performance with long-term sustainability objectives in cocoa-producing regions. • Higher shade-tree densities lower cocoa yields but reduce production costs. • Net cocoa income remains unaffected under higher shade-tree densities. • Crop diversification in CAFS provides insufficient economic benefits. • Small-scale farmers better mitigate economic trade-offs of higher shade-tree densities. • Policies should prioritise rewarding farmers for shade-tree preservation in CAFS.