That might sound like just a de facto two-party result, but in practice it works a bit differently. Each coalition must balance its policies and actions according to the differing goals of its components (and in the knowledge that not doing so will collapse the coalition).
Not a perfect system, as any vote of "no confidence" can force the leader to dissolve the government and try to reform one (or face a new election). If things are churning, this can get messy and expensive, with elections occurring frequently and the government always in somewhat of a state of flux. In some cases, one party ends up being so powerful that they don't need to accommodate other parties.
Japan suffers from this, with the (abysmal) LDP* holding all the power. They're awful...but Japan is an ageing country and the old folks vote for them in droves.
* Rather ironically, that stands for "Liberal Democratic Party," but the LDP is anything but liberal. they're Japan's Tories, their GOP.
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