Some quick recap.
In building off the introductory post, we see that the effectiveness of the DR depends on the armor damage (increasing the height of the red box), amount of DR (increasing the height of the black bar), monster hit rate (increasing the length of the red box and black bar), and how much defense is lost (increasing the length of the pink box).
The ultimate decision if the armor provided a net gain or net loss is, again, determined by comparing the areas of the black bar to the pink box. The black bar is the damage that would have been taken and was now absorbed by the armor. The pink box is the damage that is now taken, but would have missed but for the reduced defense.
If we calculate DR by average damage, this means that it might be more rewarding (if the monster rolls low on damage) or less rewarding (if the monster rolls high). That variability makes it an interesting tradeoff across all battles. In systems where DR is accrued without a penalty, it isn’t interesting. Gaining 2 DR is always better than zero, and 4 DR is better than 2. Without penalties, you always go for the maximum DR.
Of course, one alternative is to have armor be a penalty in other ways. You can make it expensive to acquire (in feats or in gold), have high armor checks, or reduce speed. These methods are less desirable because they make it hard for low level characters to achieve the archetype of the heavily armored character. We don’t want rule mechanics to get in the way of the game.
Making armor cost a lot to acquire is also worse because once you’ve paid the cost, you are always richly rewarded. It would be like a string of feats that each do nothing, but are prerequisites for a feat that gives +10 attack. The path to the ultimate feat is boring, and once you are there it is similarly boring, just in a different way. We want choices to provide interesting variability as often as possible. Making armor occasionally a bad call is a good (design) call.
But we cannot ignore that different tiers of armor require different investment. How do we distinguish them? Initially, Light armor is set to reduce damage taken from each hit by an average of 1% of total HP at any given level. Medium armor is 2% and Heavy armor is 3%. These percentages are maintained by allowing for magical bonuses to increase the DR granted. At the same time, different armors will have different magical properties available to them with the more powerful properties being reserved for heavier armors.
The defense lost is static and does not go away. Conceivably some feat or class could take some of it away, but I wouldn’t recommend it because then the interesting tradeoff also goes away.
Finally, I briefly mentioned the idea of cutting off armor during battle. These are the neat scenes that make the game memorable; when a knight realizes his foe hits so infrequently but so hard that he’d be better off removing his armor and just dodging. That has awesome potential, but the current rules really don’t support stuff like that. Armor currently takes long enough to don that it isn’t tenable as a “during combat” action. There is no point in writing up rules for stuff that, because of the rules you chose, will never see use. This is Type II Clutter.