Reduction
Psychologically:
This vision has several different meanings, hence, is to be respected always exactly to the whole connection: A person reduced in the dream or thing, the she points to the contempt by the dreaming. If he himself is smaller, however, in the dream than in reality, this is a sign for his feeling of inferiority or he must be angry in the awake life maybe at a contempt of his person. Another person who becomes smaller in the dream is a warning signal to the dreaming, because with shrinking she also loses her original meaning for the dreaming, until he loses them, in the end, completely.
(See also giant, dwarf)
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