Why do parties merge? Electoral volatility and long-term coalitions

What brings competing parties to coalesce into new entities? I present a model of electoral competition in which parties can form alliances and decide how binding these should be. Parties face a dynamic trade-off between insuring themselves against significant shifts in public opinion and allowing flexibility to respond to future electoral changes. The model shows that more binding alliances such as mergers emerge in equilibrium when electoral volatility is high; instead, when voters are predictable (e.g., highly partisan), parties either run alone or form more flexible preelectoral coalitions. When the electorate is sufficiently volatile, a risk-averse centrist party might prefer to merge with an ideologically extreme party than with a moderate one.