Surely this disenfranchises those most willing to compromise, who are probably going to end up being those who support small parties?

Let's say you a Right and Left party, and breakout Far Left which is actually very popular but has previously lacked electoral support due to its 'outsider' status.

People's favourites might look like this:

Right: 30% Left: 30% Far left: 40%

However, 75% of Far Left favourites actually vote for Left too, because they prefer them to right. This ends up with the following result:

Right: 30% Left: 60% Far left: 40%

So we are left with 'establishment' mediocrity instead of the most popular result.

Is this OK because a majority of people don't actually want 'far left'? Maybe. Intuitively though, I think taking preferences away will freak people out, particularly in situations where there might be different levels - what if there was a Far Right party that Far Left voters really don't want in - would some end up voting for Right to avoid that happening? They might win despite having 70% unpopularity!

I'd prefer difficult counting processes over a blunting of people's democratic will.