Friends or traders? Do social networks explain the use of market mechanisms by farmers in India?

A farmer's long-term relationship with a trader can improve access to market information, but removes the farmer's option to sell to other traders in any specific year. Social networks could ace either as substitutes to traders, helping disseminate market information and fostering economies of scale, or as complements, where farmers help build relationships between their trader and their peers. Using a household survey from India, we investigate whether and how social networks are associated with a farmer's choice to enter into a long-term relationship with a trader. We find that peers directly affect this choice. Further, we find that network characteristics and the household's position within the network influence the decision to have a long-term relationship. Specifically, the more central the household and the smaller number of connections with other households, the higher the likelihood a household has a long-term relationship with a trader.