You've probably heard it said that, "perception is bigger than reality." That's especially true in the world of fashion. Consider these intangible factors that drive up cost:
Cachet - The wealthy and well-connected keep coming up with ways to distinguish themselves as the savviest and most beautiful and discriminating shoppers. After exhausting the opportunities afforded by buying the best quality, what's left? The "in" thing, of course. Prestige plays a big part in what makes any designer item worth the price. Being the first to wear a hideously expensive but beguiling shoe gives the wearer bragging rights and makes her the center of attention. Is it worth it? When the cost of admission to a select group of rich and powerful people is what you happen to be wearing, driving or drinking, sure it is.
Promotion - Those shoes you see studded with diamonds for a price tag in the millions of dollars are more a marketing tool than a product. Do people buy them? Maybe, but they're a one-of-a-kind item with an extremely limited, possibly nonexistent, market.