Input price and industry concentration in a Cournot oligopoly

The impact of input price changes on industry concentration in a Cournot oligopoly depends on the type of firm heterogeneity and on the curvature of the demand function. Firms might be heterogeneous in their ability to use the input undergoing the price change, or in their ability to use complementary inputs. For the same demand function, it is possible that industry concentration can increase with one type of heterogeneity and decrease with the other. Conditions are derived for the industry concentration, as measured by the Herfindahl index, to increase (decrease) for each type of heterogeneity. In all cases, the change in the Herfindahl index is proportional to the variance of the initial unit cost distribution among firms.