What is your experience with the law of diminishing returns ?

As subjective as it might be. Personally, I have not encountered it yet.
This is unusual, I think, same brand speakers for half the price being preferable overall. Were the electronics source and cables the same when you were auditioning ? 
My experience with "the law of demising returns" is that its an abstraction at best, with no basis in reality. One simply cannot say that more money buys less incremental improvement, for the simple fact that we all know of components that cost less but sound better. In all those cases not only does spending more get you a bigger return, even spending less will too! Its just one of those loopy fantasies people won't let die. For what reason I haven't the foggiest. They should. But they don't. Oh well.
It is only a loose metaphor about the fact that money is not the only factor for a good sound... For me eliminating noise  is the most important fact  about audio...The rest is only good gear or not so good one that does not sound because of that at his top level potential...The same gear I owned with insatisfaction before cleaning now I am in love with... 
I will give an example within my current system. Power cords, yes again. One is Purist Dominus used to have $2100 retail price, another Top Gun by CPCC used to cost $800.
If I compare them on the integrated amp the sound difference is big enough to justify the price difference, but if I compare them on either phono stage or cd player, it is not. For me. Dominus is still better in every respect everywhere. Sound difference on regenerator also would justify the price difference.
Since I bought them both used, for $120 and $650, I would put Dominus everywhere if I could find more of them for that price.
Law of diminishing returns is a real measure of value. You cannot get value in the remainder. If you don’t care about money, go ahead and spend $500,000 or hit that glass ceiling. The rest of us are laughing all the way to the bank.