Not sure which question to answer: "what's your philosophy" or "why do we buy cheap stuff"
I'll answer both.
People buy cheap stuff for any of the following reasons (at least):
1. They believe the cheaper product represents a good value for the money. For example, I have a blacksmithing book in which the author tells us that he no longer buys premium american made metal files. Instead he buys lots of inexpensive chinese made files and just throws them out more often. The end result is a better cutting edge on the file being used for the same amount of money spent. Or how about 1.5 volt lithium AA cells? They last a lot longer in my digital camera or in my Arc LSH. No question. But the cost per minute of runtime goes up. So unless I was going to leave the light in my car as a backup, I would either just use alkys (or rechargeables.)
2. They just don't have the extra money to spare, even though the more expensive item would be a better value over the long haul.
3. There is no long haul and they just need the item for a single use, or for a short term.
4. They are uninformed and short-sighted, and do not understand that there is a difference worth paying for. They think that anyone spending more than $10 on a flashlight is simply getting ripped off (for example).
5. Their priorities are screwed up. This last one is one you'd maybe see in safety or life or death type situations, such as LEO's and flashlights. I'm told by reliable sources, that LEO's are remarkably unwilling to spend any kind of serious coin on thier flashlights or flashlight accessories. And yet, it would seem to me that a flashlight would be one of the most important tools in the LEO tool-kit. Seeing, or not seeing someone who's armed and dangerous, would have to be rather *ahem* damned important, right? Granted, as you go to higher and higher quality tools, the rate of return goes down, so that you are spending a LOT of money to get that last 10 percent. But even so, I would want the best no matter what the cost (within reason, of course).
As for my own personal philiosophy, I try to carefully weigh all the factors involved and then make the best decision. If it's something I will only use once in a while, I will be less likely to drop a lot of money, unless I really need a high quality tool in order to do the job. I absolutely HATE trying to do a task with a tool that is not suitable.
Like Al, however, I will not spend a lot of time bargain shopping for an item. Once I've determined that I want, for example, a SureFire L2, I will buy it from a dealer whom I know to be reputable and helpful, even if it costs me $10 or $20 more.