Sliders and knobs versus discrete tiers
Most games offer easy/normal/hard as three presets. Easy: players take 50% damage and deal 150% damage, enemies have half HP. Normal: baseline. Hard: enemies deal 200% damage, have 50% more HP, and their AI aggression is cranked to max. A few games let you customize: a slider for enemy damage, a toggle for friendly fire, a select for whether AI uses abilities. Customization lets completionists dial their preferred challenge. A speedrunner might choose hard difficulty with easy health pools (to race) but hard damage (to stay sharp). Most players just pick normal and expect a balanced experience.
The player psychology of difficulty settings
Offering easy difficulty reduces completion rates on normal: players who would have gritted through hard moments instead drop to easy. Some designers see this as accessibility (good), others see it as a missed learning opportunity (bad). The inverse: offering extremely hard modes (ironman, permadeath) creates prestige for those who beat it and a long-tail engagement stream as players attempt and fail repeatedly. Hard modes should feel like a separate game, not just a tuning dial.