Journal of Culture, Society and Development www.iiste.org ISSN 2422-8400 An International Peer-reviewed Journal Vol.52, 2019 14 The Role of Social Networks in Economic Decision Making Processes: The Case of Customers in Selected Banks of Shashemene Town, Oromia, Ethiopia Bewunetu Zewude Department of Sociology, Wolaita Sodo University Abstract The aim of this research was to assess the role of social networks (circles of friends, family members, close relatives, members of an ethnic group, congregates of a certain religion, etc) in peoples’ economic decision making endeavors, focusing on how these variables influence customers’ choice of banks in Shashemene town, Oromia, Ethiopia. Oromia International Bank and Cooperative Bank of Oromia were purposively selected as case studies with the intention that the nomenclature of the organizations is associated to the largest ethnic group in the study area (oromo). A descriptive survey research design was used in which quantitative data were collected from 237 samples selected based on convenience sampling technique. Data were then inserted in to SPSS version 20 for further analysis and presented using descriptive statistical tools. It was found that 79.3% of customers belong to the dominant ethnic group in the study area (Oromo). Respondents’ decision of becoming customers of the current bank was made because there were employees in the bank with whom they had personal relationships, realizing that they can make transactions using their mother-tongue language, the nomenclature of the bank is associated to their ethnic identity, and due to recommendations from close relatives and friends that have been using the bank (8%, 5.1%, 25.7%, 5.5%, respectively). In addition, social networks also play the role of serving as sources of information for customers during the process of bank selection. Findings suggest that social networks influence individuals’ economic behavior by supplying information, serving as role models, and recommending others to join an economic behavior similar to their own. Above all, people do not always behave after rational calculations of the costs and benefits of an economic action; instead, they also act according to the social setting in which they live, often in an attempt to comply with existing norms. Keywords:- economic behavior, bank selection, social networks, rationality, ethnicity DOI: 10.7176/JCSD/52-02 Publication date:October 31 st 2019 Background of the study Every day life involves varied level of economic action and decision making for individuals, organizations, and the society at large. The motives behind such economic behaviors vary both between and among these different units of analysis. Scientific explanations for the drives of economic decision making range from the very Smithian perspective to the modern elucidations emphasizing on the role played by social forces in determining individuals’ economic decision making. Most researches undertaken so far on individuals’ economic behavior have been largely influenced by the neo-classical tradition that emphasizes about how a person’s economic decision making is determined by monetary incentives alone (Kinga, 2017:3). At the first pole are rational choice theories defining individual decision making as the process of determining what options are available and then choosing the most preferred one according to some consistent criterion (Jonathan & Paul, 2004). The “thin” version of the theory assumes that individuals are fully informed about all their decision alternatives, the probabilities of their outcomes and their consequences, in which there are no cognitive limitations in the perception or processing of this information. Above all, it is argued that individuals base their decision on cost-benefit calculations and choose the alternative that generates the highest expected utility (Brian, 2013). There is, however, a long tradition of research suggesting empirical evidences refuting the arguments of rational choice theory and the most important of this being that real world choices often appear to be highly situated in the way in which a choice is posed, the social context of the decision, the emotional state of the decision maker, the addition of seemingly extraneous items to the choice set, and a host of other environmental variables (Jonathan & Paul, 2004). Individuals often make choices that are sub-optimal from the economic perspective and their rationality is bounded due to limitations in their cognitive capacities (Thaler, 1980). People frequently act on emotions, by a force of habit, care about others’ welfare and fairness, are influenced by the context of the decision, use heuristics, and make biased judgments (Kinga, 2017; Michael & Satoshi, 1997). Social network theories produced an alternative view to rational choice theories where the attributes of individuals are less important than their relationships and ties with other actors within the network (Alex, 2011). Social network theories contend that many economic interactions are embedded in networks of relationships and the structure of the network plays an important role in governing the outcome (Matthew, 2009). According to