Just went thru this on my 86 300sdl. It was the master cylinder. Even though I had no fluid leaking anywhere, it was the master cylinder. I stubbornly replaced all my rubber brake hoses first as they were 24 years old and needed replacing, but my pedal still would sink slowly while sitting at a red light. I replaced the master cylinder and all is well.

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John
1986 300sdl
1985 380se