In another thread on the topic of Prestige (the mechanic that affects how quickly your cities grow), seanw asked me a question about building/conquering a bunch of cities or developing a few large ones. It's a big issue though, so rather than derailing that thread, here's a fresh one for discussion.
For anyone who is not currently aware of the current growth mechanics in the game, here's how it works:
City Development
Your cities have a Growth value (in citizens/turn) and a Food cap value (a large multiple of the # of Grain on the city site - eg, if you're currently producing 100 Food per Grain on a city settled with 3 Grain, your pop cap would be 300, I believe each 100 citizens is one city level).
The growth value is quite small, very very few buildings directly add to it, eg. the Inn and Pub add 0.5 each! Research in the Civilization tree gives you those buildings, and Prestige comes from your heroes and some research upgrades, possibly other sources as well, but its rare.
Prestige is divided up equally amongst ALL of your cities as bonus growth. If you have 10 Prestige and 1 city, it grows at a massive +10 citizens per turn. If you have 10 cities, they each get +1 growth.
At certain population counts, your city increases in size. This has several effects: it gives you more space to build new buildings in the world, it expands your borders, and it gives you a unique city upgrade for that city.
Discussion
I can't answer to overall balance between few/many cities, its a large question that needs the feedback of a many players on different map sizes and AI difficulty settings - I haven't played enough games yet to see one way or another if one is flatly superior to the other.
That said, here's my thoughts on the matter.
One major issue with less cities is bottlenecked production. Larger numbers of cities can spit out more units in a given span of turns, particularly if the owner is wealthy, due to rush production.
However, beyond that, assuming the armies are already built and you don't have to recover from catastrophic losses, there's no particular advantage either way - the smaller nation can build those same units more quickly, just not as many of them in a single turn if push comes to shove.
The second issue is gold/research output. In theory, the smaller nation should have larger gold and research output from their larger, more developed cities, relative to a larger empire built up in the same timespan. I don't *think* there are any global % based bonuses to empires, which would flatly favor larger empires. There are however, single city based % bonuses, which do favor larger cities.
Remember also that outposts used to funnel resources to fewer, larger cities will get a bigger benefit from those city boosters as well.
The timespan part is important however - over the course of a long game, I can't see too many situations where a smaller empire would be superior, because eventually, a larger empire will grow to max size, and at that point, they will have a vastly superior output of production/gold/research.
With that said, that is not an inherently bad thing, at all - in fact, it's pretty cool, because it means you can either go for a few bigger cities early, and use your early growth advantage as a weapon to crush nearby nations or defend yourself from multiple enemies more easily due to a smaller area to defend.
Or, you can go for rapid expansion or conquest, relying on your heroes to handle more of the early fighting (no upkeep/build costs + they grow more significantly from experience than common units).
Guns or butter, blitz or build.
That's the theory - in practice, I haven't played enough to develop a firm opinion about the mechanic one way or the other.
Testing it out
So, play some games and chip in with your thoughts.
It is still _very early_ in game balance, and no one has had significant time with the beta to play many long games, so I'd ask you to keep the hyperbolic OP/imba comments to a minimum until we have more time to test it out.
There are still far too many rough edges, bugs, and other issues that can affect this, but since it's a pretty core issue to how the game plays out (as with all 4x games), it's worth testing.
Please DO go and test this yourself though - be sure to report back on the SIZE of the world you played, the DIFFICULTY of the AI, and whether you went small empire or large empire right off the bat. I'd strongly recommend you move up from 'normal' difficulty unless you have trouble there, as the AI is really passive on normal.
My first game was Small/Normal and it was a cakewalk, I'm finishing up a Medium/Challenging game now that was pretty hairy (I lost my capital within the first few dozen turns), but at this point I'm just screwing around testing spells, so I'll finish this up and go make a concerted effort to do a small empire start on whatever the step up from Challenging is.
It may be that there are too many easy ways to exploit the AI, such that the size of your empire is irrelevant, but going small or large should let you test out the prestige mechanic just fine, and give you a feel for how your hero/army/research development goes.