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DKP exists because dice are a stupid way for an organization to distribute rewards. It's an effective way of making sure that the best rewards go to the members of the organization that will benefit the organization as a unit the most.

Your assertion that smaller guilds in WoW lose members to the uber guilds is inaccurate, in large part due to the 40 man cap on raid instances. Every WoW guild that has MC on 'farm status' that I have encountered has stopped recruiting. In addition, the lockout system encourages the existance of smaller guilds. Having multiple 40 man raiding teams isn't really useful for these guilds because it adds to administrative overhead.

Now, I'm not in favor of the DKP system from an organizational standpoint because it encourages competition and backstabbing among guild members in a way that is not really productive for long-term stability. There are more intelligent ways to go about it, but they require good leadership and a mature membership.

The developers could instantly solve these silly issues by getting rid of all random drops and replacing it with a more sensible system that rewards all of the raid participants instead of a lucky few.