I guess in that way it works. It would definitely reduce the cost of items. The one good thing with item loot is things are cheaper and easier to come by for the casuals. The more I think about it with teams pvp it might even work better with item loot (and I was against item loot).
I couldn't stand RZ (always played VZ) because if you wanted to pvp you were a 'pker' and thus it meant you (if you don't become a pker) lost a lot more items than you ever gained. With teams you can pvp more because you're supposed to.
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