The most common way to play 6-player Diplomacy seems to be by having Italy's units hold every round and disband instead of retreating. How will this affect the balance and feel from the 7-player game? Which countries will be most affected? In general, how should each country change its strategy?
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The biggest beneficiaries of Italy's absence from the game are its two immediate neighbors, France and Austria Hungary. All other countries lose by comparison, but especially Germany.
In a seven player game, I would rank France behind England, Turkey and Russia, because of France's vulnerability. Without the threat (and check) of Italy in the south, France becomes the strongest country.
Austria-Hungary, Germany and Italy are neck-and-neck for the three weakest countries in a seven player game. Without the threat of Italy, Austria-Hungary is now equivalant in power to Turkey, Russia, and an England weakened by the new French power. Meaning that Germany is left alone at the bottom. It is a case of "misery loves company.
I once played Austria-Hungary in such a game. Did well on the eastern front, balancing Russia and Turkey, but France walked away with things in the west. After the game, "England" (a very gifted first-time player) pointed out that he, Germany and I should have combined against France; and that when my fleet was ejected from Tunis, I should have "retreated" it to North Africa instead of the Ionian sea, to support his entry into the MidAtlantic Ocean.