First of all, what's wrong with buying a 200-dollar purse?
Some people have a taste for Rifles, some people have a taste for VGA cards, some people have a taste for cars, and some people .... like purses I suppose. If you can afford your field of infatuation, I see no problem.
My pen is a Mont Blanc collectible, Peter The Great I, 888 pieces worldwide (yes I'm showing off), and sells at Christie's nowadays for $25 000+. I ordered and bought it 8 years ago when it was released, for about 6000$.
But you know what? If it weren't for the pen, I would have never started an enthusiastic convo about brands with the president of an insurance company, that ended up as an invitation for lunch, and in return an excellent job for my fiancee.
Having these "elite" brands says a lot about your taste (not to mention financial status), and opens doors for you. Is it correct? (Politically) No ... But I could care less.
And yes, most of those who can afford it can tell the difference. Those who don't don't matter :).
As for the dog and purse situation. Suppose I was having wine in some Bohemian crystal glass, at a friend's house, and I accidentally break it. Would he/she ask for it's price? He/She might. but I would just give them the "you're cheap" look and throw the money in their face.
Diane is a cheap wannabe *****. But if she has the lack of courtesy and manners to ask for money, then I say pay up.
If we apply the same situation to an item of substantial worth, like a car, then it would be fair to pay. So I guess it's "fair" for Tom to pay, but not very polite for Diane to ask.