Last-Iterate Convergence in No-Regret Learning: Games with Reference Effects Under Logit Demand

Mengzi Amy Guo (), Donghao Ying (), Javad Lavaei () and Zuo-Jun Max Shen ()
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Mengzi Amy Guo: Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720
Donghao Ying: Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720
Javad Lavaei: Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720
Zuo-Jun Max Shen: Department of Industrial Engineering and Operations Research, University of California, Berkeley, Berkeley, California 94720; and Faculty of Engineering and Faculty of Business and Economics, University of Hong Kong, Hong Kong, China

Management Science, 2026, vol. 72, issue 2, 1007-1024

Abstract: This work examines the behaviors of the online projected gradient ascent ( OPGA ) algorithm and its variant in a repeated oligopoly price competition under reference effects. In particular, we consider that multiple firms engage in a multiperiod price competition, where consecutive periods are linked by the reference price update and each firm has access only to its own first-order feedback. Consumers assess their willingness to pay by comparing the current price against the memory-based reference price, and their choices follow the multinomial logit (MNL) model. We use the notion of stationary Nash equilibrium (SNE), defined as the fixed point of the equilibrium pricing policy, to simultaneously capture the long-run equilibrium and stability. We first study the loss-neutral reference effects and show that if the firms employ the OPGA algorithm—adjusting the price using the first-order derivatives of their log-revenues—the price and reference price paths attain last-iterate convergence to the unique SNE, thereby guaranteeing the no-regret learning and market stability. Moreover, with appropriate step-sizes, we prove that this algorithm exhibits a convergence rate of O ˜ ( 1 / t 2 ) in terms of the squared distance and achieves a constant dynamic regret. Despite the simplicity of the algorithm, its convergence analysis is challenging due to the model lacking typical properties such as strong monotonicity and variational stability that are ordinarily used for the convergence analysis of online games. The inherent asymmetry nature of reference effects motivates the exploration beyond loss-neutrality. When loss-averse reference effects are introduced, we propose a variant of the original algorithm named the conservative- OPGA ( C-OPGA ) to handle the nonsmooth revenue functions and show that the price and reference price achieve last-iterate convergence to the set of SNEs with the rate of O ( 1 / t ) . Finally, we demonstrate the practicality and robustness of OPGA and C-OPGA by theoretically showing that these algorithms can also adapt to firm-differentiated step-sizes and inexact gradients.

Keywords: last-iterate convergence; price competition; reference effect; multinomial logit model (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:72:y:2026:i:2:p:1007-1024

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