> if the cost of “better” is worth it to the buyer. Can they see the difference? Do they care?

This is exactly the phenomenon of markets for "lemons":

> https://en.wikipedia.org/wiki/The_Market_for_Lemons

(for the HN readers: a related concept is "information asymmetry in markets").

George Akerlof (the author of this paper), Michael Spence and Joseph Stiglitz got a Nobel Memorial Prize in Economic Sciences in 2001 for their analyses of markets with asymmetric information.