Serbian Djokovic completed Rafael Nadal's miserable week with a 7-6, 6-3 defeat of the Spaniard but it proved in vain for the world number three, who could only sit and stew as Davydenko completed Group B by defeating Soderling 7-6, 4-6, 6-3.
With Nadal bottom of the group having lost all his matches without winning a set, the other three ended with two victories each but Soderling progressed in first place and avoided a semi-final showdown with world number one Roger Federer.
Davydenko edged into second spot by virtue of a 5-3 sets record compared to the 4-3 of compiled by Djokovic, whose hopes of defending the title he won last year in Shanghai and climbing to world number two above Nadal were crushed.
Soderling, who is only playing in the year-ending showpiece after American Andy Roddick withdrew because of a knee injury, will next play Argentina's US Open champion Juan Martin del Potro for a place in the final.
EVERY GAME COUNTS
Despite exiting the tournament, Djokovic refused to blame the group format that caused complete chaos the previous evening when tournaments officials took an age to work out the final standings in a tight Group A.
"I think in Masters Cup, in World Tour Finals, (the round-robin system) it's actually good," Djokovic, who beat Davydenko earlier in the tournament, told reporters before discovering his fate.
"In my situation maybe not now, because my destiny does not depend on myself but that's the way it is. Maybe the fact that every set counts and every game counts puts a little bit more pressure on you," added Djokovic, who was left to rue a second-set capitulation against Soderling earlier in the week that ultimately proved costly.
Thankfully there was no repeat of Thursday's head-scratching, mainly due to the fact the equation this time was much simpler.
Davydenko knew victory would take him through at the expense of Djokovic and the fleet-footed baseliner proved up to the task.
He saved two break points in the eighth game of the first set before taking the opener on a tiebreak but had no answer to an inspired Soderling in the second as the Swede levelled.
Soderling's concentration wavered in the deciding set and his forehand went to pieces at 2-3 to hand Davydenko the break that was to prove decisive.
The ninth-ranked Swede saved one match point and looked set to save another but sent a wild forehand yards over the baseline.
NADAL SENT PACKING
Nadal never looked in the mood to light up London's impressive O2 Arena from the moment he walked on court against Soderling for his opening match Monday and against Djokovic he again looked a shadow of the player that began the year in such devastating fashion by claiming the Australian Open title.
"It's not very disappointing, no," Nadal told reporters before packing his bags for Spain where he will prepare for next weekend's David Cup final against the Czech Republic.
"It's only disappointing if you arrive here with the feeling that you have a big chance to win. But I didn't arrive here with that feeling."
He lost his opening two service games, although his instinctive battling qualities allowed him to break Djokovic twice to stretch the opening set into a tiebreak only for the baseline errors to return to undermine his hopes of finally winning a set in the tournament.
Nadal needed treatment on his lower back at 1-2 in the second set. He dropped his serve again in the following game with yet another forehand error and Djokovic stayed out in front to claim victory in just under two hours.
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