The thing is, this is far from universal. People don't buy a substantially worse smartphone or car to save $5. But they'll accept a substantially worse product to save $5 on airline tickets.
Which two airlines have substantially different products for a $5 difference?
If you didn't mean literally $5 perhaps you can give us some real examples of cost differences?
Personally I find so little difference between airlines in economy these days. And Premium Economy is nowhere close to a '$5' difference long haul these days
They don't, because competition erases those differences. It's a very competitive market. If people were willing to pay a little extra for a few more inches of seat pitch in economy, you'd have an airline that offered a few more inches of seat pitch in economy with slightly higher fares.
Elsewhere people are saying it’s not a realistic alternative because it’s too expensive. I think people just want a better product without paying any more money. I hate cramped economy seats too, and I fly in them anyway, but I acknowledge that I’m deliberately choosing money over comfort and it’s my own doing.