Hello. I've been trying to wrap my head around damage reduction (DR) in D3 for a while now, and thought I'd put pencil to paper to help solidify some of my ideas about it. This post is just a dump of what I came up with in Excel based on what is known about DR at the moment.
I used monster level 63 for all formulas, but it's worth noting that changes in monster level are relatively insignificant in the data. If you're just starting Inferno, your numbers will be almost identical.
Comparing Armor and Resistance
This first chart shows how increasing your armor or resistance impacts DR of the respective type.
How much armor does it take to increase your DR by 1%? The answer to this question changes depending on your current armor/resistance value, so this chart shows about how much more armor or resistance is needed given your character's current value.
Overall DR is calculated by combining all of the specific DR types into something like a weighted average. Due to the co-dependence of the variables, there's no way to say how much a given amount of, say, armor will impact your Overall DR without also considering the amount of other specific DR types you have. This first chart therefore looks at how armor impacts your Overall DR for given amounts of resistance. ("Melee" here refers to the DR bonus for monks and barbarians.)
Then we have a similar chart showing how resistances impact your Overall DR for given armor values.
I've attached the raw Excel file for anyone who cares to play around with it. Let me know if you see any problems!
Edit: there were problems! Thanks to the commenters. I had the scale off by a factor of 10, so these charts should be a fairer comparison of armor and resistance. I've also updated the attached Excel file as of 5-24.
Ok, I decided to look at how much Armor was needed to decrease your incoming damage by 1% relative to your current DR from Armor, since going from 90% DR to 95% DR halves incoming damage and that should probably be accounted for. Here's what I came up with: formula =50*63/(1/(0.01*(1-A2/(50*63+A2))+A2/(A2+50*63))-1)-A2
As you can see, my function's graph is linear (the slope is 0.0101 repeating). So while it might not move the percentage on the character screen in a big way, I don't think diminishing returns are nearly as bad as they might first appear. Of course, this all assumes both my math and conclusions are correct and I'm frequently wrong, so please let me know if you spot an error.
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...and if you disagree with me, you're probably <insert random ad hominem attack here>.