Here's how it works, and I've confirmed this with Bashiok a looong time ago (I think like a year ago):
No matter who kills the mob, your magic find is what counts for the items that drop on the ground for you. So for example, if you have 100% magic find, and your friend has x% magic find, it doesn't matter who kills the mob, loot will drop on the ground and it will be at 100% MF. It's that simple.
So, theoretically you could jump in a game with the max magic find gear, do no damage whatosever, and collect fat loot.
the text in increased size made me a little happy on the inside. +1 rep
Player 1 has 100% magic find. Player 2 has 0% magic find. First mob drops for Player 1 but Player 2 kills it. Player 2's magic find is calculated to the kill but since he has 0% magic find, Player 1 receives a normal item. 2nd mob drops for Player 2 but Player 1 kills it. Player 1's 100% magic find is calculated to the kill and a rare item drops but Player 1 cannot loot it or see it. Player 2 loots it & wins the game.....So my question would be, is the loot round-robin or who gets the kill?
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the text in increased size made me a little happy on the inside. +1 rep