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.