Sibling donation games: pure‐altruism, strategic‐altruism, and the interaction of familial and public transfers

Accompanying the rapidly aging populations of high‐income countries are increasing transfers of time and money from adult children to elderly parents (ascending altruism). In this paper we first develop a theoretical model to characterize the general reaction‐functions of two adult siblings choosing transfer amounts (possibly time) to their needy parents under two alternative motivations: pure altruism and strategic altruism. We show that transfers are strategic substitutes under pure altruism and strategic complements under strategic altruism. The Nash‐equilibrium generates distinct predictions associated with each motivation and we then explore some implications of our findings. A result with potentially important policy implications is that the response of children transfers to increased pension payments to the parents depends on the children's motivations. This contrasts with much of the literature which assumes transfers decrease with increased pension payments.