I see your point.
I think the single most important factor is screen resolution. This has a strong effect on the card performance. There's really no point in spending hard money on a graphics card is i'm running a 1440x900 screen, for instance. Most entry level cards (~ $100) fill that screen resolution quite nicely. If there is a need to play certain heavy duty games, I'd certainly suggest a card in the middle middle (150 to 200 USD) for piece of mind. So when I see someone bragging about their > $300 card on such low resolutions, I'm left with a smile.
So what then? Well, most of the problem is a certain "moar is better" culture that surrounds the gaming community, coupled with lots of misinformation and an almost pathological vulnerability to the placebo effect; "I swear I play better at 120 fps than at 80 fps!" (a physiological impossibility).
I won't deny anyone the pleasure of spending money on something really cool and powerful. Pride is a good thing. But then, for some reason, people try to get all sorts of justifications to this behavior. They shouldn't! It's perfectly fine. But they do anyways. And it's those justifications that create myths and misinformation.
But up the screen resolution (and the type of games one plays, or the work they do on the computer) and things start to become more justified. At 1920x1080 certain games will simply not run well on low end cards. Gamers want their games to run at the top settings because these do affect the quality (the beauty) of what one sees on the screen. At that resolution they can't do this with modern games on a $100 card and some will still have some troubles with a $200 card.
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