Ah, the infamous difficulty setting. Whether we're playing a new game in a long-loved genre or trying out something new, difficulty settings present a big problem for the first-time player: they almost always choose incorrectly. And it's our fault.
The main reason for this disconnect is driven by an understandable drive for us, as game creators, to let the player choose the level of challenge that feels right to them. The problem occurs, however, because the player has not only imperfect information about their choice, but very little feedback from the choices themselves.
Let's present a scenario: we're making a first-person shooting game and we give the player options of easy, medium and hard. If a player is experienced in FPS games, perhaps they choose hard. But maybe our game is unusually difficult, and since our "hard" setting increases the effective health of the enemy the game seems like an unfair and frustrating grind to our new player.
In this case, the player will hate our game. They are good at shooters so obviously, it is our poor quality game that is at fault for their lackluster experience. But perhaps the "medium" difficulty is the one we expected most players to pick, so we balanced the game primarily with this setting in mind. Maybe our theoretical dead-eye would have enjoyed our game in this setting!
Difficulty is, in my opinion, one aspect of play where we should remove direct player choice.
Instead of asking the player what difficulty level they want, we can change the experience programmatically based on their actions and the current state of the game. In this way, we can avoid the obfuscating choice at the start of the game (or buried in a menu!) and any choices we do give to the player, like permanent death, will be more clear and meaningful.
One famous example of dynamic difficulty is the AI Storyteller in Rimworld. In Rimworld, the player gets to select one of three AI directors, each giving a different overall feel to the game and each helps to adjust the gameplay to keep things interesting with intermittent challenges and avoid overwhelming the player.
In one of my own games, we had a hunger mechanic. As the player character exerted themselves, they would slowly increase their hunger. In early playtesting, this was fine but as we added more skills to the game, the player's hunger level became much less even and more dependent on playstyle. To remedy this, we would generate in extra food and food-bearing enemies if the player entered a dungeon level with a high hunger level. in this way, the player would only run out of food and starve if they spent too long to go from level to level.
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