In this article, the hypothesis is examined that coalition government formation in West European parliaments is systematically constrained by the existence of limits or bounds on the extent to which parliamentary parties can compromise on their policy positions. Two methods are developed by which these bounds or ‘policy horizons’, as they are termed here, can be estimated, and it is demonstrated via the analysis of hypothetical data that the methods, although imperfect, are unlikely to manufacture artefactual threshold effects. These methods are then applied to data on fourteen post-war West European parliamentary systems to show that, even when other relevant factors are controlled, the structuring effect of policy horizons can be detected in the formation of coalition governments. The article concludes with some comments on the theoretical implications of the existence of policy horizons.