When does the law diminishing returns kick in?

Since a chain is no stronger than it's weakest link, and the audio chain is the same; this means you have to plan on replacing all the components in the chain to get your money's worth. That law kicks in when you can no longer buy the components.

in economic terms, production is optimal when mr=mc, i.e., marginal revenie - marginal cost.

in audio it means if you spend an additional dollar to attain less than a dollar's worth of sonic improvement, diminishing returns has been achieved.

this is subjective of course. but i think, i have defined, literally what diminishing returns means.

it is a term used in economics quite frequently as most corporations try to maximize profit.

if you produce too much the additional cost of production will exceed the additional revenue.

in audio , if you spend too much, the additional benefit in sound is not cost justified--subjectively speaking of course.

its almost a corrolary of the famous equation:a sale occurs when the value in use = the value in exchange.

the value in use , could translate into the value placed upon the sound of a a component.

Your have to spend A LOT MONEY to get that last 5% !...

I have recently developed a very different answer to this topic than I had previously. While it is generally true that one has to spend much more to get a smaller return in sound quality, there are 2 factors I believe that mitigate this phenomenon somewhat.

First is that computer design and materials science has created whole new categories of products or products parts that may in fact perform better than more expensive but more traditional products.

Second, and more relevant is that the much more expensive (and better performing) product has a setup and tweakability factor that the lesser product may not have. For example, you go out and buy a speaker that is twice as expensive as your current speaker. Perhaps it only performs 30% better than the previous speaker. We have the classic model of diminishing returns.

Now let's say on that more revealing, more accurate speaker, you put a better set of cables, or roll in some NOS tubes, tweak speaker position, etc. You are going to hear more of the benefit of those changes, than with the older less revealing speaker.

So yes, initially you only got a 30% improvement for a 100% increase in cost. However, over time, if other areas are improved upon (like any decent obsessed audiophile most likely will) those small improvements will pay larger dividends than with the older speaker.

That 3% increase in sound quality you got from that cable upgrade last year is now a 5% increase. And on down the line until all the small increases (now more audible) add up to significant benefits on top of the new component's qualities, making better use of the other components in the system for the one upgrade. I recently had this experience upgrading to the TAD CR1 speakers (disclaimer: which I use for audio work and sell) I wasn't getting the full potential of the great tube electronics I have, until having a transducer in the system that could faithfully reproduce the delicate signals being provided to them.

So, in this instance, a very expensive upgrade truly allowed me to first hear how significant some of the tweaks done previously were.

It may not be a linear relationship between money spent and sound quality, but with optimization and good choices of equipment and accessories every dollar spent wisely will be heard.

So the new interpretation of the law is as follows - there is no law of diminishing returns.