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defense doesn't diminish at all iirc, and I think parry/dodge diminish much earlier than that. Also for warr/pallies shield block rating doesn't diminish either. My pally tank is at 570 defense now after a late nite naxx25 run, sadly even if I wanted to replace some enchants with stam I couldn't -- for example chest +22 def is far superior to 275 health (WTF? 275???), +22 def on shield is far superior to +18 stam, etc, etc. Blizzard really dropped the ball on tank enchanting, I can kind of understand why they didn't put in +50/75 sta to weapon in 3.08 but I was so looking forward to that enchant. Back to +20 strength for now, gogo TBC enchants :(
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No defense doesnt diminish however you wont be getting +40% parry or dodge from +defense. You can't stack that much defense.
edit: as for the diminishing returns I just read it this morning those are the numbers posted on elitistjerks that have been tested (I might be off by a few percent, but they are in the general ballpark.) Dodge it makes sense that it has a higher cap as it is the ONLY avoidance stat bear tanks have.
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No I didn't factor in Diminishing returns on avoidance rating (I included Defense and dodge as the same at both providing 1% avoidance at 40 points) rating. If the amount of rating needed to up avoidance by 1% increases at some point, obviously that will throw off the model, but only at high avoidance numbers and only on the ratings that face such dimishing returns.
Regardless, the point wasn't to illustrate some magic target (although I can see where that target comes from) but to point out that the possibility of substituing Stamina for Avoidance in instances where Stamina is at or above the balance point but avoidance is below it. Eventually item levels do become so inflated you can't help but reach that point where avoidance beets out stamina and you want to leave your HP at that magic number, but until that number of item points spent in avoidance and stamina combined is calculated and defined, shooting for the magic number may not be the best option for a tank.