I just feel the need to point out the real problems that are created by the current prestige situation, and some partial solutions that I came up with, without modding the game.
To recap: I've been playing the past 4 days on a medium map, and originally I thought that this was a bug. I re-evaluated my strategy after I "Understood" how the devs wanted this game to be played and I have to say the following.
1. The prestige reduction due to many cities isn't documented in the game. The applied penalty isn't listed properly. It is also buggy and wraps around 0 and 1. I started razing cities to see the penalty cycle from 0.5 down to 0.1 and back to 0.7 again. Also there isn't any warning, you either read the patch notes and visited the forums or you're just lost.
2. It is just silly lore wise because it feels like all people want to live in a megalopolis. If I was a peasant I would want to live in a nation with 20 cities not in a nation with just 2 or 4, I wouldn't feel safe, and I don't like overpopulation.
The way to play on medium and large maps:
3. Build cities only in very important resource clusters. In the end you will have cities only in faction starting locations.
4. Raze all cities you capture, unless rule 1 kicks in, or if it has a very important strategic resource.
5. Build many scouts to keep line of sight intel on the map and protect all gaps in your empire.
The problems that this situation creates:
6. There isn't really a concept about your territory. Just blobs of lands around your cities.
7. It doesn't create a stable diplomatic environment. You will go to war cause the AI will build cities in the gaps.
8. Caravans are impractical. You now have to guard them cause they will go outside your influence to reach other cities. Also setting up routes is extremely slow.
9. The AI also stalls his pop growth.
10. Game play psychology: You are penalizing the player for playing "incorrect" instead of rewarding him for playing correctly. People naturally expect that having more cities is best.
11. Conquering territory is useless, Unless the city has 5-6 resources right outside of it, and is considered a premium spot.
There will be situations were you need a single resource or you need to deprive your opponents a resource, but you can't build a new city to do this.
I would be ok with this choice if and only if:
12. There is a repeatable tech to lower the prestige penalty. or add a "bonus city" each time you research it.
13. There is a way to claim resources without the need to have them in your territory. In the past pioneers had that functionality, now they don't. Why?
14. There is a way to claim land without building a city: call it an upgradable outpost or anything else that claims land with similar strength like a city but without buildings, or perhaps only defensive & war buildings ala fortress army boot camp, cause tiles in your cities are even more valuable now. This also fits the lore: "We don't have so many people after the cataclysm to hold the lands" In post cataclysm scenarios outposts are considered essential.
15. Provide a substantial resource bonus to the player that razed a city. Gold, materials, population transfer across all of his cities, cause right now "I razed the level 5 Kraxis capital and all I got was this lousy T-Shirt" - Nothing gained by demolishing buildings. You would have expected in a post apocalyptic world people recycling everything and not going on like "Ow we just need to demolish this mint or Ruevna there, just leave all the gold, wood and stone alone." Give us back the joy of conquest.
