"The Law of Diminishing Returns"???

Interesting thread. Everyone has made valid points already, I'll just add my two cents.

In my opinion, with this hobby there is no absolute. There are too many opinions, theories and variables to think otherwise. One reviewer gets blasted for treating his room for a more "accurate" presentation of the equipment while another gets blasted for being honest about existing room modes. One cable manufacturer says anything other than silver is junk while another makes outrageous claims about copper. Some think DIY'ers are cheapskates while others think its the only way to get it done right. One thing we must do in this hobby is decipher or filter through all the information, specs, reviews...and forums...we can't seem to peel our eyes away from, and get out and make our own decisions and conclusions. Do your own experiments, its fun and you'll learn alot about the gear and yourself. At least get out and see if your own opinions align with anyone elses.

Diminishing returns, of course. But the point where cost versus performance starts to dimish is different for everyone. Its different between components as well. There is always the point where it will cost X amount of dollars for a component to cover all the bases...at least the ones important to you. After that its up to you to assess the worth.

I think that the Law of Diminishing Returns really does exist, but the problem is perpetuated by the manufacturers themselves. I'm convinced that many manufacturers make a new component(as a prototype initially) then assign a value to it based on it's sonic standing amongst competitors products. So if a component is manufactured that has a potentially low retail price, and is astonishingly good for the money, then the public rarely gets the benefit of it, because the manufacturer jacks up the price so it sits nicely alongside competitors products in a similar price range. I believe this is rife in the cable manufacturing industry, where exorbitant prices are charged for cables with an apparant low material cost. Then when the pricing is questioned, we are given the usual "high cost of development' speil.

So basically, the standard could be a lot higher, for a lot less, and the point at which the laws of diminishing returns come into play could be at a much lower price level, if the manufacturers were brought to task over their peer driven pricing policies.

It's funny that this happens unabated in the high end audio industry, and the buying public rarely questions it.

I just bought a Toshiba unit that plays Video DVD's, CD's and various other discs. It has Dolby Pro and a built in 192khz 24 bit upsampler. It sounds remarkably good against my $5000 CD front end. I paid $59.00 for it, brand new from Best Buy. Now you tell me that the high end manufacturers are not 'price fixing'.

Rooze

We just moved one of our systems from one room into another. If it had started out in the latter room, we would have surely traded out components and cables in order to 'get it right'. Only because we've already heard the system in the first room do we know that it works for us, because right now in room #2 it sounds mediocre at best. So yes, Rpatrick, the room treatment is crucial. I've been in several listening rooms in which the treatment simply negated the effects of the room, and the speakers which were seven feet from me sounded almost like headphones. No joke.

Also, Magnepanmike is absolutely right that the improvements up the audio cost ladder are often huge. However, the question is always "Does that work with the other components toward the end goal of meeting MY standards of satisfaction?" Everyone seems to agree that spending more often gets you more, but is it necessarily more of what YOU want? I've literally gone from one opinion extreme to another after doing something as simple as swapping out interconnects. And the component I was deciding whether or not to keep were the speakers, not the interconnects.
Hopefully, all of these responses have answered your initial question.
All the best,
Howard

The law of doubling!
My own personal belief is that when one wants to upgrade a component, if the new list price is DOUBLE that of the existing piece, there will be a noticeable sonic improvement.

Now for the caveats! Synergy is the most important factor, as many have previously said. What type of sound do you want? Slam and bass punch? Midrange to die for? Sound-stage and holographic presentation? Treble response clean, effortless and "to the moon"? Do you like to "crank it up", with a bass response to a TRUE 20 Hz (in this later case, room tuning is mandatory!)

Advertising budget! Big corporations that spend "beaucoup dollars" on multi-paged magazine ad buys, and having an intertwined corporate structure (Harmen, for example), will have a unit cost that can be MUCH greater than a small company that has "word of mouth" advertising performed by satisfied customers.

Cosmetic beauty! I'm using Atma-sphere equipment (Ralph Karsten era), which looks more at home in a studio, radio station, or on the road as P.A. gear. But oh, what super sound for such a reasonable price! Laser etched bead-blasted heat-sinks and chassis, mirror polished tube cages, exotic woods (speakers), gold silk-screened lettering and other beautiful design applications can rocket the list price, while doing nothing for the actual sonic performance of the piece!

Do your research! If you are planning on spending a "king's ransom" on audio gear, you should consider a trip to Las Vegas in January for the C.E.S./THE Show. The knowledge gained could save you a considerable sum, and there are show specials and demo units for sale as well!

As an economist i would say that first you would need do is to derive your personal production function. Where the thing being produced is good sound which can then be translated into utitity or personal happiness. this would be a weighted function with some variables or maybe in this case just one variable, cost. thus making good sound a function of cost, this is assuming that all components have the same cost to quality of sound ratio. if the sum of the weights of the function is greater than one, then you are experiencing incresing returns to cost. if the = to 1 then constant returns to cost, if less than one diminshing returns to cost. Here are some interesting links to items of interest
http://cepa.newschool.edu/het/essays/product/returns.htm
http://william-king.www.drexel.edu/top/prin/txt/Cost/cost17.html