In fact, it is determined by the “ideal party size” variable, which is determined by the player’s level. It is a common myth that max AI lord party size is determined by campaign AI difficulty. – Campaign AI also determines a Lord’s wealth (I think? Or it might just be a side effect of drastically lower recruitment costs) and their army’s XP rate - both of these primarily determine their army’s troop quality. Whereas on poor campaign AI, you can easily get away with never taking a single lord prisoner throughout your entire game, on good campaign AI, I would recommend that you take enemy lords prisoner - even upstanding and good-natured ones - to prevent a constant stream of enemies. On Good Campaign AI, a lord will be able to completely recover from defeat after just a week or so. In code, this is technically done by determining the cost of recruitment. – Campaign AI mainly determines how fast an AI Lord can recruit troops. Overall, on good campaign AI, and to some extent average, enemy kingdoms will be significantly more powerful and it becomes essential to take lords prisoner. Each “non-core” fief increases tax inefficiency by 3%/4%/5%. The player can hold 6/4/2 “core” fiefs, i.e fiefs that do not suffer from tax inefficiency. – Player tax inefficiency becomes more severe as campaign AI difficulty increases. In format: Poor/Average/Good (i.e the values on respective difficulties would be 6/4/2)

All of the difficulty settings are pretty self-explanatory, save for the AI settings.

Mount and blade warband companion