Since the absolute lower bound on worst-case of a comparison-sorting algorithm is O(n log n), evidently one can't do any better. The same complexity holds here.
Worst-case time complexity:
1. Inner loop
Let's first start analyzing the inner loop:
for(i=0;i<n-diff;i++) {
if(a[i]>a[i+diff]) {
temp=a[i];
a[i]=a[i+diff];
a[i+diff]=temp;
interchange=1;
}
}
Since we don't know much (anything) about the structure of a on this level, it is definitely possible that the condition holds, and thus a swap occurs. A conservative analysis thus says that it is possible that interchange can be 0 or 1 at the end of the loop. We know however that if we will execute the loop a second time, with the same diff value.
As you comment yourself, the loop will be executed O(n-diff) times. Since all instructions inside the loop take constant time. The time complexity of the loop itself is O(n-diff) as well.
Now the question is how many times can interchange be 1 before it turns to 0. The maximum bound is that an item that was placed at the absolute right is the minimal element, and thus will keep "swapping" until it reaches the start of the list. So the inner loop itself is repeated at most: O(n/diff) times. As a result the computational effort of the loop is worst-case:
O(n^2/diff-n)=O(n^2/diff-n)
2. Outer loop with different diff
The outer loop relies on the value of diff. Starts with a value of n/2, given interchange equals 1 at the end of the loop, something we cannot prove will not be the case, a new iteration will be performed with diff being set to diff/2. This is repeated until diff < 1. This means diff will take all powers of 2 up till n/2:
1 2 4 8 ... n/2
Now we can make an analysis by summing:
log2 n
------
\
/ O(n^2/2^i-n) = O(n^2)
------
i = 0
where i represents *log2(diff) of a given iteration. If we work this out, we get O(n2) worst case time complexity.
Note (On the lower bound of worst-case comparison sort): One can proof no comparison sort algorithm exists with a worst-case time complexity of O(n log n).
This is because for a list with n items, there are n! possible orderings. For each ordering, there is a different way one needs to reorganize the list.
Since using a comparison can split the set of possible orderings into two equals parts at the best, it will require at least log2(n!) comparisons to find out which ordering we are talking about. The complexity of log2(n) can be calculated using the Stirling approximation:
n
/\
|
| log(x) dx = n log n - n = O(n log n)
\/
1
Best-case time complexity: in the best case, the list is evidently ordered. In that case the inner loop will never perform the if-then part. As a consequence, the interchange will not be set to 1 and therefore after executing the for loop one time. The outer loop will still be repeated O(log n) times, thus the time complexity is O(n log n).
