GreenTongue:
Do Arena Style Games Work Because They Are 1 v 1?
No moreso than regualr games. Games only work if Players show up and I've plenty of experience with 1v1 Arena where Players wander off before they even start as well as in the middle of fights.
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How many combatants can you have in an arena style game and still be manageable / fun?
As many as the GM can handle GMing for.
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Are they slow paced and subject to interest loss?
Games are only as slow the GM allows. If a GM can post hourly and enforces hourly posting, it's gonna be a damn fast paced game. If they only post once a week, it'll be slow.
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Are the actual fights only a small part of play?
Again, up to the GM. You can run pure combat Arena, limited rp Arena's, full rp Arenas, whatever floats the GMs boat. I imagine an Arena setup that has at least some rp, along the lines of professional wresting with 'heels, faces; team-ups, grudges, etc' would make for a more interesting game than pure number crunching and tactical 'minis' combat.