Putting aside the sometimes contentious issue of power cords, speaker cables, interconnects etc, the place I think diminishing returns shows up first is in the power amp or power amp section of receiver or integrated amp. Consider this: most speakers will be the highest distortion device in the reproduction chain, typically around 4% ~ 6%. There may be some that show less distortion so lets assume we have a 2% distortion speaker system. Consider the amp that drives that speaker. It will have a power rating and distortion rating and noise floor. Say, 0.1% distortion at 50 watts output with noise -90dB below 1 watt. Not great specs but certainly a respectable amp. Now you upgrade. Go to 100 watts, 0.05% distortion and noise at -100dB below 1 watt. You have doubled your power, halved the distortion and cut the volume of the noise in half. Lets say you have gotten a bargain and the new one cost you 1.5 times what the 50 watt amp cost you. Seems great right, only what are the audible effects of all this super upgrading. Distortion: The speakers are still producing 2% distortion, so a drop in the amps distortion from .1% to .05% is not going to be audible. Just gets lost in the speaker's distortion. Drop in noise floor: At -90 dB the noise is 1/512th as loud as the music at 1 watt. Virtually inaudible to most of us. The -100dB spec drops that volume of that noise by half, it is true, but again, if -90 was inaudible, then -100 dB is also inaudible, so again no really audible improvement. Now we come to power. You've doubled your output power. Does that mean you have doubled your volume (assuming your speakers are capable of that of course)? No it does not. To double the volume of a sound, the power must increase by 10 dB or 10 times the power. At twice the power you get a 3 dB increase in volume, a small audible increase.
So the summary here is the law of diminishing returns is with us with a vengeance in the field of power amps. And, unlike the more doubtful issues of audiophile power cords and wall sockets, this is very real with us every time we purchase an amp with distortion that is less then 10% of our speaker's distortion rating and noise less then audible at out listening level.
Shelly_D