While it’s possible to blame the auction house itself on the apparent low quality of loot in Diablo 3 Gold, a large part of the blame has to lie with the game designers. Buying items on the auction house was always the easiest way to progress through the game, making it almost mandatory. The main reason for this is that items in D3 had built-in linear power progression. Each item has an item level that determines its maximum stat budget just as in World of Warcraft, making gear from further along in the game almost automatically better than gear from earlier areas. The auction house then made that gear readily and cheaply available to everyone.
Blizzard had access to hard data on drop rates and item stats from Diablo II when designing the sequel and claimed that legendary items at D3’s launch were about as rare as uniques in its predecessor. Players always complained that the drop rates were lower, but there’s no reason to think Blizzard didn’t use all the stats at its disposal and match up the drop rates. So why then did good items seem so rare? I think this was completely the auction house’s fault. By showing up to several million players’ items in one searchable place, the Auction House distorted the appearance of rarity and value.
In a grey economy such as trading on a forum, you see only a small percentage of the items for sale and have to invest effort in looking for what you want to get your hands on. Even World of Warcraft’s auction houses exhibit roughly the same behaviour because each shard contains only about 5,000 players. But when you find what looks like a good item in Diablo III, it inevitably turns out to be not quite as good as you thought because there are so many better ones already on the auction house. If you can see the farming output of millions of players and compare it to your own findings, of course your loot is going to seem like crap. Ironically, this problem has lessened over time only because Diablo III’s playerbase has been shrinking since launch.