How much does a DAC do the more expensive it is?

An obvious observation but I'll make it anyway:  In general, a more expensive DAC should be constructed better, inside and out, and in theory should last longer than less expensive ones.  Say compare the internal parts quality of one of the numerous S.M.S.L. DACs in the <$1000 range with those by Gustard, Audio Research, Holo May, and others.  Those chosen components from the PCB material to the various resistors, capacitors, inductors, transformers, how well isolation is done, thickness of the chassis, etc., all add up to a device that should still be kicking 10 to 20 years from now instead of dying after 3 to 5. 

Does that matter to you?  To some who change gear often maybe not, but to others assembling a system to last them many years, it can. 

Many would like to buy a DAC and not be thinking of replacing it after one year. They'd rather upgrade say another component or feed one of their other hobbies. 

A long time ago, the rule of thumb was to spend 50% of your budget on speakers and 50% on the electronics.  Is that rule still valid or not? In today's "digital world" is it more like 66% on electronics, 33% on speakers and 1% for accessories?

It’s far more about your personal reaction to a high end DAC than trying to quantify what it does. I’ve been saying that audiophiles seem to have developed the ability to strain at gnats and swallow camels to an unusual degree. An issue that a non-audiophile can easily identify may seem trivial to the audiophile, while something unnoticed by a non-audiophile may be a cause of agony or ecstasy for the audiophile. The cause of the audiophile’s perception may be nothing to do with any change in the actual sound waves reaching their ears, but a combination of sound, vision and other knowledge that creates the whole perceptual experience. There’s no way to argue against this other than to listen and compare blind of any information about which item you are listening to other than what it sounds like. This shouldn’t cause any stress for the listener unless the audible differences, assuming they even exist, are extremely subtle.

It would appear that smaller artisan boutique manufacturers will price their components at a comparatively higher price than a large company. If I were to order a DAC from some arcane manufacturer in Eastern Europe and there are only a handful of these DAC’s that exist in North America, I’d expect to spend everything that I have in my IRA Roth. Now am I getting my money’s worth, probably but not necessarily. There are some fairly common DAC’s on the market that do not break the bank but they sound very good. The primary reason for a great sounding DAC is based on that companies engineering team. It is difficult to be hired as an engineer with a large company with a rich history. Also, quality parts are desirable but the price of a DAC doesn’t guarantee that the internal parts are going to be of the highest quality. For me, the primary criteria for what a DAC should do well is to make digital sound analogue. 

@jasonbourne52 big +1

@baylinor +1

equating price w sound quality in audioland is a serious mistake

the primary criteria for what a DAC should do well is to make digital sound analogue. 

Aside from the fact that by definition, this is what a DAC does, it is precisely my benchmark. But what if you don't have a good analogue front end to compare it against?

equating price w sound quality in audioland is a serious mistake

100%, as several others have also pointed out. 

Price is what you pay. Value is what you get.

I believe that is a Warren Buffet quote. Shop wisely.