What is your experience with the law of diminishing returns ?


As subjective as it might be. Personally, I have not encountered it yet.
inna
Rather than the oft used 'diminishing returns' I believe it's far better to utilize Ordinal Utility or/plus expected utility from decision theory ... at least in reference to our choices with respect to this hobby, and the OP's question.

+1 @folkfreak 
No experience so far. $10k power cord replacing $1k power cord with $5k preamp or power amp, anyone ?
inna"I have not encountered it yet."
That is because the components comprising your Music Reproduction System must progress beyond budget, entry level, mass produced equipment you have not yet entered the circle, realm, and world of true high performance, high end, tight specification audio.