A model of electoral alliances in highly fragmented party systems

Highly fragmented party systems are composed of a large number of political groups, many of which have negligible bargaining power when it comes to negotiations of electoral alliances. Inspired by the Brazilian system—one of the most fragmented in the world—we provide a stylized model of electoral alliances in which there is a competition for the support of the small parties. Two leading parties try to entice a small one by simultaneously offering transfers (e.g. government positions, support in other elections, prestige). Through a first-price sealed-bid auction approach, we can analyze the role of two particular factors in alliance formation, namely pragmatism and ideology. Our findings show that, in equilibrium, the favorite party tends to offer lower transfers than the underdog. Furthermore, the closer the leading and the small parties are in terms of ideology, the smaller the transferred amount. When the ideological closeness between the small party and the underdog is sufficiently large—relative to the favorite—the effect may be strong enough to overcome the electoral advantage of the favorite.