Political parties have long been recognized as key institutions in representative democracy. However, the question, “What is a party?” in political economy is as difficult and elusive as the question, “What is a firm?” in industrial organization. The boundaries between political parties and interest groups or other citizens’ organizations, for example, are rather blurry, and it is conceptually difficult to discriminate among alternative definitions of parties. It should therefore not be surprising that not much progress has been made in providing a compelling answer to this important question. In fact, as compared to many of the other topics covered in this book, the study of political parties as endogenous equilibrium institutions is still in its infancy.