Here is a closely related pair of examples from operator theory, von Neumann's inequality and the theory of unitary dilations of contractions on Hilbert space, where things work for 1 or 2 variables but not for 3 or more.
In one variable, von Neumann's inequality says that if $T$ is an operator on a (complex) Hilbert space $H$ with $\|T\|\leq1$ and $p$ is in $\mathbb{C}[z]$, then $\|p(T)\|\leq\sup\{|p(z)|:|z|=1\}$. Szőkefalvi-Nagy's dilation theorem says that (with the same assumptions on $T$) there is a unitary operator $U$ on a Hilbert space $K$ containing $H$ such that if $P:K\to H$ denotes orthogonal projection of $K$ onto $H$, then $T^n=PU^n|_H$ for each positive integer $n$.
These results extend to two commuting variables, as Ando proved in 1963. If $T_1$ and $T_2$ are commuting contractions on $H$, Ando's theorem says that there are commuting unitary operators $U_1$ and $U_2$ on a Hilbert space $K$ containing $H$ such that if $P:K\to H$ denotes orthogonal projection of $K$ onto $H$, then $T_1^{n_1}T_2^{n_2}=PU_1^{n_1}U_2^{n_2}|_H$ for each pair of nonnegative integers $n_1$ and $n_2$. This extension of Sz.-Nagy's theorem has the extension of von Neumann's inequality as a corollary: If $T_1$ and $T_2$ are commuting contractions on a Hilbert space and $p$ is in $\mathbb{C}[z_1,z_2]$, then $\|p(T_1,T_2)\|\leq\sup\{|p(z_1,z_2)|:|z_1|=|z_2|=1\}$.
Things aren't so nice in 3 (or more) variables. Parrott showed in 1970 that 3 or more commuting contractions need not have commuting unitary dilations. Even worse, the analogues of von Neumann's inequality don't hold for $n$-tuples of commuting contractions when $n\geq3$. Some have considered the problem of quantifying how badly the inequalities can fail. Let $K_n$ denote the infimum of the set of those positive constants $K$ such that if $T_1,\ldots,T_n$ are commuting contractions and $p$ is in $\mathbb{C}[z_1,\ldots,z_n]$, then $\|p(T_1,\ldots,T_n)\|\leq K\cdot\sup\{|p(z_1,\ldots,z_n)|:|z_1|=\cdots=|z_n|=1\}$. So von Neumann's inequality says that $K_1=1$, and Ando's Theorem yields $K_2=1$. It is known in general that $K_n\geq\frac{\sqrt{n}}{11}$. When $n>2$, it is not known whether $K_n\lt\infty$.
See Paulsen's book (2002) for more. On page 69 he writes:
The fact that von Neumann’s inequality holds for two commuting contractions
but not three or more is still the source of many surprising results and
intriguing questions. Many deep results about analytic functions come
from this dichotomy. For example, Agler [used] Ando’s theorem to deduce an
analogue of the classical Nevanlinna–Pick interpolation formula
for analytic functions on the bidisk. Because of the failure of a von
Neumann inequality for three or more commuting contractions, the analogous
formula for the tridisk is known to be false, and the problem of finding the
correct analogue of the Nevanlinna–Pick formula for polydisks
in three or more variables remains open.
