Law of Diminishing Returns; where does it kick in?

I think that most of us who have been in this hobby for a while have experienced the "law of diminishing returns", the point at which spending a lot more money produces a little bit better sound or just tradeoffs.

I would like your opinions on where you believe this occurs in Speakers, Amps, CD players, and cabling.
I have not heard them, but I guess from all the comments on Agon, the Nordost Valhalla throws cables out as a choice for now.

All components have this. The one component I am least likely to spend a lot of money on is the digital front end. I have a heavily modified Link DAC by Stan Warren with his modded Aiwa CD Changer. I bought it used/mint from a friend of Stan's in Oregon for $500 shipped. I figure I would have to spend a lot of money to do better; and how much better? I assume my dollars would be better spent elsewhere.

Going the other direction I can probably go the furthest in improvement without diminishing returns with the speakers; the amp second.

So much depends on what you want in a system. Getting that extra little bit definitely costs quite a bit more. With speakers, if you want that big, live sound, with lots of air movement, it is going to take a big speaker, which in turn is going to cost more money than a smaller speaker. Is the sound worth the difference in price? That would be for you to decide.

If you spend $80K for a BMW, is it 4 times as good as a $20K
Honda? For some people, it is definitely worth the money, but it is also relative to what we earn.

This is not an audio only issue, it is relevent to most things; clothes, cars, women, etc. :)
Based on used prices (45 cents/dollar) I'd say full range speakers at 8K; amps at 5K; preamp at 5K; cables at 1K; CD at 6K; TT at 3K. So for about 35K in my estimation you have a high quality reference set up with preferences in intonation/timbre/presentation rather than weaknesses...
The rule of doubling is my rule of thumb. Noticeable differences occur when you DOUBLE the list price of a component. Since this is a geometrical progression most people reach a plateau very quickly! Please note that this is a VERY crude scale, and has much less of an application for speakers and cables.
Your question contains a false premise, I think: that there's some real relationship between price and sound quality. There is, today, some wonderful stuff at very reasonable prices, and some really bad stuff with price tags in the stratosphere. And given how much personal preference plays into this, it's quite possible that price and quality are random for any given consumer. That said, I'd offer a rule of thumb for three items:
Speakers: never.
I/Cs: $10/meter
Cables: $0.50/ft.
Beyond that, it's all personal preference.
Mr. Bomarc is quite right in pointing out that this is based on a false premise. Mr. Classsicjazz proposes that up to approx. $78,000.00 MSRP, you are still getting value for each additional dollar spent: I don't think that the said law kicks in at that point, I think it has then reached the point were it has been kicked to death and trampled for good measure. I remember years ago going through the October issue of Audio magazine and fantasizing by building the greatest system on earth by adding to my dream list the most expensive component in every category. Harmless fun, I guess, but not the way to building a realistic hi fi system to live with. It seems to me that a good number of participants to this forum appear to think along such lines. Any attempt at drawing lines at which one should simply fold his hand and walk out will be met by the bouncy rhythm of audiophiles jumping up and down claiming that every last microgram of "improvement" justifies any increase in price. The strange thing here is that we are not dealing with percentage increases but with multiplying the price by factors of two, three or four times and yet there are still those who contend that the perceived added benefit is justified. With no objective guidelines on how each component should perform, there is no way to set a dollar amount at which the whole thing becomes abusive. If you do as cable manufacturers do and claim that the whole thing is a question of aesthetics or perception, then the sky is the limit. I have no wish of leaving the bang for the buck brigade, so my priorities and price points are pretty well established in my mind and they are a lot closer to Mr. Bomarc's. Happy holiday season, one and all.
I agree with Jonathan it really depends who you are and where you are in life, but here is how I 'limit' things:
Digital source-$10k
-Interconnects-2k/per pair
-Powercables-1.5k ea.
Room treatment-4k

Now all I have to do is find my rubber check to order all of this stuff! But that is the most I would like to spend on gear, I would rather concentrate on having loads more software with a system of the caliber, I am about half way to my limit, so in a few more years we'll be there! Just need more time, after all I have only been into this for 2.5 years. Cheers,
I think the "law of diminishing returns", the point at which spending a lot more money produces a little bit better sound and/or tradeoffs occurs for every stereo component. I have spoke to many audiophiles that have said,” I spent the extra money but the sound was not that much better. If I had it to do again I would have not spent the extra money”.
Just want to second those who said that there is no direct relationship between the quality of sound achieved and the cost to achieve it. In addition, those who think you have to spend 35K (used prices) or 80K (retail prices) to get a system which SOUNDS cost-no-object, all I can say is I'd like to borrow your checkbook. I think, with careful matching, you can build what would be called a Class A system for less than 20K. Cost of the components is not important at all in determining how they will sound. How each product complements the others sonically is the most important. Of course, you do have to find products of high quality, but these are rarely the most expensive. Now despite all that I have said, there is a law of diminishiing returns, but it doesn't have to do with money. It has to do with aggravation. When you get this "near perfect" system, there will still be something about it which is still bothering you. The question is will it be worth the aggravation to make a change to it in order to improve it only to find that the modification probably threw some other quality of the sound off.
When I'm broke, 2K for a system seems too much. When I've got a ton of cash, 150K seems only reasonable. I've been down the road on two middle level systems and I am struggling with my willingness to part with the better portion of a house in the country. So, here's my equation. For the new house in Pescara, send my ML335 & Dunlavy's over and just listen. I really like the way they sound.

For here at home, I'm thinking that if the Rockport hyperions are as outrageously good as they are touted and the Whamms aren't better, then I can live with 100K for speakers. Amps? 20K, Digital source? 6-10K. Wires??? 5K? 8K? Live without the pre... I only listen to cd's. It seems simple. I guess it's the 100K question. Right?

Bill E.
In addition to personal preference, I believe that it depends on what music you are trying to reproduce. We hear live classical music once or twice a week. We have Opera, Symphony and chamber music series tickets in the center section all around row 12. The major thing that got me into high end audio was trying to reproduce an acceptable substitute for the live experience. We have friends that listen with us to our system and also sit with us at the live concerts. They know nothing about equipment. Over the last two years we have inflicted many “test” pieces of high end equipment on our friends. Based on the “acceptable substitute” for live Mahler, Wagner Stravinsky, and Bruckner, diminishing returns and the onset of personal preference sets in around the estimates of Tireguy and Classic Jazz
Personally :
$1k for amp (integrated perhaps best at this cost point)
$2k for speakers
$500 for CD
$1k for turntable (inc phono pre)
$200 for collection of homebrew cables
$5k for source material CD/vinyl (not mentioned in previous posts)
Maybe I'm a cheapskate ? Maybe tone deaf. Or perhaps I just prefer spending time with the family listening to my system vs hours at work required to to (legally) earn the money for a $100k system.
Perceived Return(PR) on $$$ spent for audio rises steadily at a 45 degree angel until it hits your Ear Level(EL), then divide by the square root of your Annual Income (AI).

Very early in commercial gear, as it must due to the distribution chain and all that advertising to pay for.

No, I'm not saying that it's all a rip-off, I have been involved in manufacturing electrical appliances at the R&D level, so I understand the cost structure involved.

That is why I build my own or modify second hand gear. I would sooner pay 100% too much for a good quality resistor or capacator (which is reasonable considering the sort of inventory a parts supplier needs to carry - at US$2.50-5.00 for a good resistor to buy in, that's a lot of money folks) than a 1,000% too much for the same component in a commercial product!

Sure, it takes time and it takes even more time to learn what is good and what is not. But for me, that makes it even more fun!

Anyway, good sound has been around for a long time now. Some of the clasic designs, mostly tube admittedly, sound really good with modern components.

The use of high speed soft recovery diodes in power supplies alone (that are available these days), can really improve the sound of some older gear. Also the better capacators such as Silmic, Black Gate, Muse and Cerafine all work wonders.

So, my advice is find some good, but not extravagant second hand gear and learn how to "modernise" it with high quality components.
Just make VERY SURE you learn about the safety aspects of working with electricity. Like a gun or a car, it is not dangerous in and of itself - but ignorance can be (and often is) FATAL.
Electrocution is not fun, I found out the hard way due to a faulty domestic fan. I have never had a shock from audio gear as I am VERY carefull not to. Once was too much.

Just find a like minded soul and learn. Plenty is on the web also.
A search for kits will also turn up a lot. It is the metalwork that is the hardest bit really - all done for you in a kit!

I believe that is the best way to get bang for the buck and to push the limits more before the diminishing returns really kick in.
I am just in the process of purchasing some Audio Alchemy gear (DTI 32 pro, DDE3, MPS and transport) through Audiogon.....
The adventure continues!
I'm a relatively newby to the more mid range Hi-fi equipment so what I'm about to say may stroke some of you out with my stupidity and inexperience. I have a yamaha rx-v3000 reciever with two front B&W cm4s and two bose speakers high on the wall for the backs just to let you know where I'm coming from. It appears that it is the quality of the recording that will make speakers sit up and sing after you get past a certain price level. I have had recordings that sound unbelievable and some that are poor. I don't think there is any equipment that will make some poorly engineered disc or vinyl sound good. The demo cd that was used at first to audition the speakers that I have would put the group in front of you. Therefore you must surmise that one recorded in a similar manner would produce the same.... No amp, no preamp, and just 100 watts going out to the speakers. I think that 2500.00 to 3000.00 dollars won't get you perfection but can make you satisfied...if you can be. Now correct me if I'm wrong. My E-mail is listed.
Many have rightly pointed out that diminishing returns can occur for different people at different levels of time or money. It also appears that, short of $250,000 retail, incremental sound quality improvements do continue. For me, returns on investments drop dramatically at the price point where my wife and friends think I've gone crazy! Fatparrot's doubling hypothesis works for me. At $10,000, things were good and I couldn't justify more -- I was happy. After a while, my wife began to accept my illness and I got more sophisticated (sicker?) and was able to move to $20,000. Now my wife knows I'm nuts and I'll have to wait a long time to get to $40,000. Of course, I can't justify that to myself right now. Maybe I should spend a few thou on some tweaks though ...
Whatever point of diminishing returns you establish now, it will always move up as you invest more time in audio.

If an audiophile can perceive a difference, he suddenly cannot live without it!

How many times do you think you've finally got *it*, only to feel the need to upgrade after some time?
you guys are way up the diminishing returns ladder

diminishing means - alot more dough a lot less refinement

admit you are willing to pay a lot more for little incremental sonic gain

even lower prices you must pick tonally accurate gear that synergizes well or buy bad schlock

prices (new/used) I buy well kept used pieces (see my system on right side)

cd tranpsort 2000/1200 teac(wadia) vs-10 $450
dac 1500/1000 EVS Millenium II $1050 new
solid state amp 3500/1400 Audio Research D200 $1400
preamp 4000/2500 Audio Research LS5 mkII $2000
speakers 5000/2500 Von Schweikert Vortex $1400 pr
interconnect 1200/600 Cardas Gold Cross $300pr
speaker wire 1400/800 Harmonic Tech Pro 11 shotgun

will upgrade speakers and interconnects
but I live on the low end of the diminishing returns curve

tube amps - big bucks and expensive tube upgrades
so I stay away


In the real world it is the point you can't afford or are unwilling to pay for a subjectively minimal improvement. Of course this will vary from one individual to the next as noted. Hanging around this site ensures acceleration of this progressive disease. If someone could please save us the time and let us know if they have discovered "real" yet, I would be much obliged.

hangig around this site raises your threshold - you tweak more, but it also is informative of great equipment and the web available used market
I think this is what high end audio equipment dealers tell there customer who just spent 30,000 on a pair of Speakers. SORRY .....
Simply divide the system cost by Sound Quality Units to obtain the Diminishing Returns number. 

Any number under 10 is a poor system
Any number under 1 is a better system
Any number under .1  is SOTA 

The key to an accurate assessment is proper measurement of Sound Quality Units.   ;)
subject personal audio history.........( - o + ) ...........history audio industry object

The " ( - " are the left subjective side and " +) " right objective side of the " bias zone" where the returns are related to a balance between subjective impressions and to objective engineering progress...

The "o" is the center bias zone where the returns are impossible to really assess or calculate with clear subjective or objective points....

We all at some moment in time reach the center point " o " where no progress is sensible, for reason linked to our own limitations (hearing personal history) or to our incomplete methods of embeddings that makes impossible evaluation of the audio system Parts and Whole in term of S. Q. or in term of money....

The most important point in my post is the consciousness that the rightful embeddings methods (mechanical,electrical,acoustical) and our own listening history are the unbeknowst factors that play much a role....Not only the cost of the gear like some think superficially....

The point of diminishing returns end to be a fixed point for each of us in particular, but begins like a variable point in general ....

I have not spent a lot on audio gear and I have a very nice sounding system or two. But I have heard the big systems and there is no comparison. If you want to run with the big dogs you have to spend some big dough. Diminishing returns, maybe that's a thing but it takes big bucks to get to the top levels. Same as any other thing one might do. 

P.S. However you can put together a very good system that most people would find extraordinary for the price of a modest car.  
P.S. However you can put together a very good system that most people would find extraordinary for the price of a modest car.  
My system put to shame most of what i listen to for 500 bucks...

 The key is the mechanical, electrical and acoustical working dimensions embeddings controls NOT the price of the gear at all....

Consumerism is not audio.... Acoustic is.....