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A multi-party system is a system in which three or more political parties have the capacity to gain control of government separately or in coalition.

Unlike a single-party system (or a non-partisan democracy), it encourages the general constituency to form multiple distinct, officially recognized groups, generally called political parties. Each party competes for votes from the enfranchised constituents (those allowed to vote). A multi-party system is essential for representative democracies, because it prevents the leadership of a single party from setting policy without challenge.

If the government includes an elected Congress or Parliament the parties may share power according to Proportional Representation or the First-past-the-post system. In Proportional Representation, each party wins a number of seats proportional to the number of votes it receives. In first-past-the-post, the electorate is divided into a number of districts, each of which selects one person to fill one seat by a plurality of the vote. First-past-the-post is not conducive to a proliferation of parties, and naturally gravitates toward a two-party system, in which only two parties have a real chance of electing their candidates to office. This gravitation is known as Duverger's law. Proportional Representation, on the other hand, does not have this tendency, and allows multiple major parties to arise.

This difference is not without implications. A two-party system requires voters to align themselves in large blocs, sometimes so large that they cannot agree on any overarching principles. Along this line of thought, some theories argue that this allows centrist to gain control. On the other hand, if there are multiple major parties, each with less than a majority of the vote, the parties are forced to work together to form working governments. This also promotes a form of centrism.

The United Statesmarker is an example of where there may be a multi-party system but that only two parties have ever formed government in the last 150 years. Taiwanmarker, Germanymarker, Denmarkmarker, Indiamarker, Indonesiamarker, Francemarker, Kosovomarker and Israelmarker are examples of nations that have used a multi-party system effectively in their democracies (though in each case there are two parties larger than all others, even though most of the time no party has a parliamentary majority by itself). In these nations, multiple political parties have often formed coalitions for the purpose of developing power blocs for governing.

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