Buying things seems to get more complicated every year. This increased complexity can include opportunity costs, the choices and sometimes, even the price. Then at some point in your life, you get a job and now you have more disposable income to spend. It's a lot easier to make a decision when you have a small budget. Good things at low prices generally don't come in huge varieties – take headphones for example. There is the Koss KSC75 at $15 - and then a huge gaping chasm in quality until you can afford at least a pair of Grado SR60s, which come in at around $80. When you have more to spend, you have a lot more choice. At the $100 - $150 price range, you have an abundance of excellent choices. In fact, you can now choose based on other criteria, like comfort, open or closed, size and portability. Unfortunately, the inverse is also true – there are also few choices at the high end of the market. If you are in the market for a new car that costs more than $2 million dollars, you have little choice besides a Bugatti Veyron Super Sports.
Needless to say, this leaves us with a conundrum most of the time. When should you splurge for the better product? There are probably a couple of factors to consider, some more obvious than others.
Is the more expensive product better? This could be an objective scale or a subjective scale. Sometimes, the comparison is simple: 3-ply toilet paper is strictly better than 1-ply toilet paper (maybe, in the case where you aren't using for its intended purpose, you could make an argument otherwise). Other times, like choosing between the iPhone 5 and the Samsung Galaxy S III, you can have read countless comparisons and reviews and not come to a good conclusion.
Can you tell the difference? Don't just read what you can find on the Internet and take it as gospel. Sure, a 24k gold plated HDMI cable from Monster Cable is probably strictly better than a $2 cable from Monoprice; but you won't be able to tell the difference. After all, the signals are digital and the cable is going to be hidden behind your television. Nobody (except, perhaps you) would ever care how much you spent on your damn cable.
Are you buying it because of the brand? A lot of geeks and nerds look down on this pattern of buying. Why? This behaviour means that you might be buying a product (and paying more) based simply on marketing – not its actual merit. A good example of this are Beats headphones; they aren't actually bad, but they sure are expensive. Most Beats headphones have excellent Sennheiser alternatives for less than half the price - so if you own Beats headphones, it's pretty clear your intention sways more towards flaunting your purchasing power rather proving than your audiophile cred.
Now, I'm giving pretty specific examples with clear cut differences. Really, the product you can comparing can come with numerous differences that have their tradeoffs – and this can include things like after sales service, included accessories, aesthetics and even seemingly tiny items like a special hinge on a laptop or an additional button on a mouse.
So when should you spend more? It's really all up to you. Buy what's best for you. Who cares what angry people on the Internet think?