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If the group stays approximately in those circles while they move and fight, the archers gain a massive defense bonus (the tanks are defending them from attacks) and each gains a bonus to range and ranged damage and the tanks get a big shield block bonus.

Interesting idea. I just saw that Age of Conan will do something like this.

The leader of the formation can decide on different formations and the degree of freedom the various players and NPC’s can have within the formation. The formation also serves as a cooperative travel system, yielding beneficial effects to the team as the collision of the formation itself protect the members at the rear. Formations yield beneficial bonuses to members, and offer a new type of depth to a RPG. In some cases it will be essential to pick the right formation to survive.

I will be interesting to see how it works out in reality.