>You gain literally nothing for the more expensive bikes

You do if they come with a beefy motor strapped to them.

Anyone who mountain bikes regularly on more difficult trails will end up riding a bike that costs at least $5K. You can argue that it isn't necessary but the majority of riders would definitely disagree with you. I've never seen a $1K bike on such trails.

Of course, if you just need a commuter bike that can easily be had for $1K. Of course no one really needs anything - one could just run and save the $1K.

Then you're talking about a niche, not related to any meaningful percentage of bicycle use.

That depends on the region. In western US / Canada it is not niche. Globally, however it probably is.