Trading Portfolios: The Stability of Coalition Governments

Abstract

In this chapter, we explore the question of how the inclusion of a niche party influences the allocation of ministries in coalition governments. In particular, we ask whether niche parties have an advantage because of higher values that they place on certain ministries that the other parties are less interested in. We provide a model where two parties are dividing a portfolio of three ministries, and compare the stable coalitions formed by two mainstream parties with those formed by a mainstream party and a niche party. The results show that in some cases the niche party is able to form stable coalitions with higher payoffs than the mainstream party. This advantage, however, makes the niche party a less desirable coalition partner because the latter cannot commit not to ask for better payoffs.