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The present paper studies the influence of one particular aspect of institutions, namely economic agents’ discretionary freedom of choice given by legal rules, upon the risk incurred in alternative capital markets, in the lines of the old institutional school of economics. A game-theoretic model is introduced, presenting the alternative capital markets as Harsanyi’s games with imperfect information, succeeding to each other in a Selten’s extensive game with imperfect recall. Market participants’ behaviour is made of strategies oriented on cash flows and indirect benefits, through the usage of discretionary freedom of choice offered by the applicable law. The overall level of risk in the market depends on whether these strategies reach, collectively, a state of Nash’s dynamic equilibrium, or not. The institution of nominated advisers, in two alternative capital markets, namely the British AIM and the Polish New Connect, is studied on the grounds of the model. The main finding is that, although the regulations of both markets create significant risk through the discretionary freedom of choice that the operators of these markets attribute to themselves, in terms of social games the markets seem to be quite stable. In conclusion, numerous hypotheses for further research are formulated, in particular that alternative capital markets are still institutionally young and experimental.
