this is one of those essentially unsolvable metaphysical queries with no right or wrong answers. i sort of agree with knghifi--where and whether one has hit the point of diminishing returns is ultimately up to the person writing the check. the way i look at it, while you certainly can objectively measure aspects of audio performance (e.g. signal-to-noise ratios, distortion levels, etc.), it doesn't necessarily follow that you can measure "improvement" on such basis, since so much of audio appreciation is inherently subjective--i.e. a component with "better" measured performance may not necessarily sound better to you for a whole host of reasons.
i'd also submit that people tend to fix their point of diminishing returns on the bases of their budgets. for example, i maintained for a long time that while the sonic differences between, say a $300 cdp and a $2000 cdp were very significant, the difference between that $2000 cdp and a $5000 cdp were only incremental (and, in my opinion, perhaps not cost justified). undoubtedly, if i had had more disposable cash, i would feel otherwise, and would set the point higher.
back to the mill.....
i'd also submit that people tend to fix their point of diminishing returns on the bases of their budgets. for example, i maintained for a long time that while the sonic differences between, say a $300 cdp and a $2000 cdp were very significant, the difference between that $2000 cdp and a $5000 cdp were only incremental (and, in my opinion, perhaps not cost justified). undoubtedly, if i had had more disposable cash, i would feel otherwise, and would set the point higher.
back to the mill.....