Political parties and party systems are crucial institutions for the functioning of a modern representative democracy. Two established explanations of party system fragmentation and volatility are social cleavages and institutions. However, both approaches do not sufficiently consider the role of political elites in shaping party systems. This research project therefore seeks to complement these two approaches by studying one of the most important ways through which political elites can shape party systems, namely the stability of party supply. Party supply is unstable when new parties emerge and existing parties disappear, split, merge or combine themselves into fluid electoral alliances. In order to understand how the instability in party supply affects party systems, the project asks two questions: (1) what causes the instability in party supply? (2) how does the instability in party supply affect voter behaviour and parties’ electoral support? The project builds on the state-of-the-art in the literature by studying the causes and consequences of those forms of party instability that have been under-researched, namely, party splits, mergers, pre-electoral alliances and dissolutions. In addition, it also constructs an aggregate index of party instability and considers its impact on party system volatility. In order to conduct these studies, the project will build a cross-national dataset recording the instability in party supply in approximately 30 OECD and newer European democracies. The analysis of this cross-national dataset will be complemented by the analysis of election surveys, interviews with political elites and academics, and qualitative case studies. The project will provide a major contribution to the understanding of the development of party systems in both established and new democracies.