Dominions 3: The Awakening/AI Difficulty Levels

AI Bonuses for different difficulty levels
 * Easy AI: -30% gold, resources & gems, 0 design points
 * Normal AI: 0% gold, resources & gems, 0 design points
 * Difficult AI: +30% gold, resources & gems, +50 design points
 * Mighty AI: +60% gold, resources & gems, +100 design points
 * Impossible AI: +100% gold, resources & gems, +150 design points

The AI does not improve it's thinking if you set it to higher levels. And even on impossible it remains fairly bad.

If you want to increase the difficulty you could increase the rate of money, supply and resources. And decrease the difficulty of independents. So the AI wastes less armies on to difficult indies. As a last resort you could also design the pretenders yourself, and play the first few turns of the AI.