In multi-party systems parties often form alliances before elections. Despite being pervasive, little is known about the conditions facilitating different configurations of pre-electoral alliances. This paper presents a model of electoral competition in which parties can form alliances before elections, and decide how binding these should be. Parties face a dynamic trade-off between insuring themselves against large shifts in public opinion and allowing flexibility to respond to future changes in voters’ preferences. The model shows that more binding alliances such as mergers emerge in equilibrium when electoral volatility
is high; otherwise, parties form more flexible pre-electoral coalitions. It also suggests that some power concentration is needed for alliances to emerge in equilibrium, whereas parties run alone under consensual democracies that share power among all parties. These results have implications for the process of party system stabilization.