Pretty curious issue,as unlike some people I'we seen it DOES shift at 5,000rpm by itself without any imput just like a normal automatic gearbox,but if you want to shift earlier you need to let go of the throttle throw it in Neutral and back into Drive before applying throttle,think a very coinvoluted manual sequantial gearbox with no ability to downshift(it only downshifts by itself as it should)

I know very well it's terrible for the rear diff as it kicks into gers especially the 1st-2nd and 2nd-3rd the 4th shifts well but only at around 120kph and no less.

I find this issue very interesting and I'm curious what could be the cause?Fluid appears to be all right not fresh but not new.Maybe some relay or bushings? or smth else
As of note the transmission is 214,000km if that matters.

it's a 2.3L I4 190E late 1992 iirc.

Never had an auto transmission but I always read that this is most likely a vacuum regulator issue. Also the bowden cable may need adjustment.
Other than that, the clutches in auto transmissions need pressure build up in the transmission for them to work so it could even be an internal transmission mechanical issue.

You maybe at the mileage where things start to break depending on how well the transmission was care for.

With all this being said take everything I said with a grain of salt as I have had a manual transmission for ~34 years. So I know next to nothing about the W201 auto transmissions.
Ask me about manual tranny's/clutches and I could be a tiny bit more helpful.

Good luck with the diagnostics but you may need to take this to a transmission specialist.

I own a 1991 190E-2.3 automatic. Your transmission is definitely behaving in a problematic way. Not a bad guess, Dolucassi. Given the mileage on your car, it may well be an all of the above as to what may be the culprit. It might not be a bad idea to change the transmission fluid to have the fluid be fresh. Doing so might reveal if there are any metal bits in the current fluid which would indicate a big problem. If nothing like that is found in the transmission fluid, you might then adjust the Bowden cable to see if that helps in any way. If that doesn't help then it's likely a process of elimination to fully determine where the problem is.