Markets for Diamonds and bottled Tap Water

To my mind, one of the most fascinating ideas is why there are markets for some products and services in the first instance. Leaving aside the rhetorical bit of this question, I often wonder why markets exist for products that rational people perhaps would not buy at all or in the quantities and prices that are more common. For instance, many people purchase pure tap water that is bottled in plastic under the guise of mineral water at a premium. In many instances, the cost of the good is far above what the equivalent quantities of petroleum would be. Ornamental diamonds too are quite expensive, considering that it's all an isotope of carbon. It is to be granted that there are products that have real utility but are enhanced with specific branding and therefore carry a discernible premium derived from that brand.

However, why wouldn’t one take the time to find out exactly what real mineral water is in order to distinguish it from tap water sold in cheap plastic bottles? I assume that it is not elitist to state that this is the cost of failure to fully search for and base economic decisions on information. Sticking to the formation of markets that fail to pass my arbitrary test of rationality, the above items are some that I find completely puzzling and those that perhaps would cease to exist or seriously reduced if only the purchasers knew better. I will be adding to the list as I try to understand how these markets form.