The battle size change just like they do in land battles, sizes are determined either by the Shipyard or the Trading Port whichever is the biggest. To check your garrison limit go to you town hall in your town. So if you are under the garrison limit the battles size will be smaller, if you are over you will fight in a full size battle field (where more ships take to the field each round)
There are about 5 different size battle fields To check out some great info & see the different battles size go to Ikariam help & then onto Art of warfare & then the Naval battle field
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