We study the internal organization of political parties as the solution of a moral hazard problem between a party principal (or selectorate) and two factions. Factional mobilization effort bolster a party’s electoral chances but can only be imperfectly monitored—via an internal contest. We model a party’s internal organization as a system of “prizes”, an allocation of resources between winner and loser of the internal contest. We show that when (i) a party’s baseline electoral strength is low and (ii) electoral outcomes are not too responsive to mobilization efforts (e.g., when the electorate is polarized), there is an inverse relationship between inter-party power sharing and intra-party power sharing: when election winners keep most of the power, parties should allocate power across factions in a more egalitarian matter. Otherwise, party organization resembles a winner-take-all competition between factions. Our results help organize the empirically documented dispersion in party organizational structures (leadership autonomy, centralization of candidate selection, and the formal recognition of factions in the party statute).