
Best results are with 8 to 12 people. That way, various interactions can occur simultaneously, like in any real party, and it never gets too overwhelming for the organizer, whom we'll call the GameMaster (GM). Each guest receives an invitation packet that gives them a role, or character. The characters given have a quick description of who they are, what they know, and most importantly, what they WANT. Don't give them personalities. The guests will take care of that themselves. It may be useful to give them names (I like to use corruptions of their own, which makes it easy for everyone), in case one character knows something about another.
While you can have some characters know each other, for the most part you should make them strangers. This gives the guests a chance to mingle and role-play as they discover who each other's characters are. 6-8 guests should have a real stake in the story - one has stolen an artifact and wishes to trade it, another wants to recover it, yet another believes it legally belongs to her, a fourth guest wishes to destroy it, etc. The rest of the guests (including the GM) are supporting characters. They have their own goals, but they have nothing to do with the MacGuffin. Perhaps they are in possession of lore or products that can be used by another character, but they won't know that until they hold a conversation. In any case, guests should not know there is necessarily a "stake" except their own, and would be unaware of their status as a principal or a supporting character.

The guests are of course required to attend in appropriate attire. Not all LARP settings have outrageous costuming, but dressing differently (fantasy, posh spy, utilitarian SF, retro 60s, cowboys, etc.) will distance a guest from their normal persona and help them "get into character". If a prop is important to a character, you might include that prop in the invitation packet.
A note on casting: Don't be afraid to do it! You know your guests. Give them characters you know they can play and enjoy playing, given their individual experiences and personalities. To successfully simulate strangers, guests should not be aware of what other guests might have "chosen" as their character anyway.
Location, Location, Location!
Where you have your event can be key to creating the period or genre you're trying to LARP in. Decoration can help, but sometimes a bad lay-out can kill it. A fantasy inn might be easy to do in a cabin-style house, but be unconvincing in a 4½ bloc apartment. Yet that apartment, with its white walls and box-shaped rooms could be aboard a space station. A basement apartment might make a good lower deck on a pirate ship. I haven't talked about outside events, but some stories might work better with the outdoors (a shipwreck, a camp outside Troi, etc.).

The Rules
As few a possible, frankly. I've tried various levels, but the barest minimum is always best. One-shots shine at the interaction level, but slow down considerably when rules are invoked. I recommend, for example, that there be no violence whatsoever. First, it's dangerous even with prop weapons, especially if alcohol is involved. Second, it's always a shame when a character is killed and has to stick around as a "ghost" to see how things pan out. Better to simply accept that the laws of the land prevent any kind of violence. Safe violence options (if you don't mind ghosts) includes slow-motion nerf sword fighting, laser pointer duels, or a video game battle simulation.

Story and Endgame
A good LARP has a story that could go in a variety of directions. That's why everyone has a different goal. And while some goals do not bring about an "endgame", others do. In my example with the artifact above, the game might end when someone destroys or leaves with that artifact. At that point, the GM should call everyone to the door so they can see the "winner" take a bow. Of course, other guests might also have accomplished their goal (the thief has obviously traded it, for example), but the story doesn't end when they succeed. Obviously, you want to delay that moment as much as possible, but the guests are basically running the action on their own, so how? There are ways.
On schedule: In some scenarios, it's possible to make the action follow a certain schedule. A trial, for example, would have have opening statements, testimony and a judgment, all of which take a certain time as the story develops. In a casino, a character might have been instructed not to make a move until only two players were left at the baccarat table. The innkeeper might, at a certain point in the night, announce some important news he's received, news that changes the whole game. And so on.
Disinformation and confusion: Don't be afraid to misinform guests in their invitation packets. Maybe their character doesn't quite remember their password or who their contact is. Use hearsay and rumor to make their information uncertain. Red herrings are also a good idea. If a character is told to look for a guest with a baseball cap, have five guests wearing baseball caps. One man's password is another man's casual conversation. If guests go directly to the guests they have business with in the first 5 minutes and conclude the LARP, you might just have failed.
The Debriefing

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