People do not buy luxury brands just because they are concerned with raw materials, craft, and quality, they want to convey something about themselves. Connecting the dots, the reason why luxury brands are so expensive is that, had they not been, people would not have gained status and prestige from buying them. They want to reward themselves for working hard by treating themselves to things that they could not normally afford.
Consumers buy luxury goods for many reasons, including the fact that they communicate status, wealth, and exclusivity. People purchase luxury goods for many reasons; almost all of those reasons involve strong emotions that we associate with purchasing high-priced, tangible goods. Consumers want to distinguish themselves and to define themselves, and thus, people purchase luxury goods in large part in order to gain status, pride, respect, and admiration by others, but these efforts may also evoke feelings of envy and arrogance. Whether or not we are financially comfortable, we often purchase luxury goods in order to show off or to receive the approval of others, as well as an award to ourselves for achieving something.
The psychology of buying high-priced items is relatively simple to grasp: Luxury is appealing, and to someone who can afford it, it is all good. Many of those people have none of that, however, and choosing to purchase luxuries is a decision that makes no economic sense, or at all. Peer pressure and need for maintenance are the sole drivers behind the luxury market and resulting high demand for luxury goods; a lack of knowledge in the middle classes is a contributing factor, particularly since these individuals only ultimately purchase luxury goods following recommendations from experts in the fashion industry.
Beyond the purveyors of luxury goods, a growing obsessiveness by certain consumers to buy luxury brands, particularly when they cannot afford to do so in reasonable terms, is a cause for concern as well.
Unless you are in a great job with high wages, or you have developed awesome personal savings habits, buying luxury consumer goods can be expensive (or it creates credit card balances that are difficult to repay). This is called signalling cost and status, a psychological theory which suggests people will explicitly buy luxury goods in order to signal how they are a member of a close-knit, wealthy, luxuriant connoisseurs group.