So apparently the drops go to the player who lands the last hit on the target. Meaning I could
a) work my ass off and get monster to low HP only for some random archer to snatch the drops (not the exp) from me
b) be an ass myself and just time my attacks to steal drops from other people.
The solution is simple: if two players are not in a party, the loot goes to the one who dealt the most damage.
