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I'm putting this here since I think part of it does involve a minor bug, but the mods can move it they think otherwise.
I'm on my 3rd campaign now as the Welsh faction of Gwined. My beginning province didn't start with a blacksmith shop and other structures seemed more important as I went on. None of the next few provinces I captured had one started, but I knew that I was on the verge of capturing Staefforscir, which starts with a special forge that in addition to armor/weapons gives a fame bonus for each level of the structure.
There are only 3 levels of these shops and each only gives one a 5% increase in armor and weapons. I captured the province mentioned, which by that point was up to a level 2 shop. The cost was 300 gold to upgrade each unit to a level two armor/ weapon status from zero. Level 1 costs 100 gold and I guess level two is another 200. Somehow spending 300 gold to add a 10% upgrade to a 100 basic cost spear unit is a bit iffy, but I did it as funds were available. Now the kicker to all of this is that if I simply recruit a fresh unit in that province, it comes complete with the upgrade at no additional cost over a non upgraded unit from another province. Remember this fact when I discuss level 3.
At that point, I also started to upgrade the forge to level 3. When I finally did, and got my previously upgraded level 2 units in the province, that extra last 5% upgrade was a whopping 450 gold more. To make matters even more perplexing, I happened to get an army into the province that had no upgrades at all. The cost now was an inexplicable 900 gold total. That's 150 gold more than having done it in two steps from scratch, i.e., $300 for 2 levels and $450 for the last.
I had just moved a 13 unit zero armor level army in and the total cost to upgrade was $11,700. I was only making about $3 or $4k per turn at the time. For each 100 gold spear unit, it would make more sense to disband it, then recruit 3 more at $100 each, then merge them. By one or two turns max, they would be at full strength including full armor--saving me $600 for each unit. Most starting archers and javelin troops fall into this category also.
My point to all of this is that :
1. I think the discrepancy of 150 gold between recruiting a unit in one step versus two steps to be an overlooked bug. 2. Regardless of whether it's a bug or not--the ultimate cost seems a bit out of proportion for the return--especially for the low tier units like levy spear and missile troops--especially when this can be overcome by the exploit of disbanding, re-recruiting, and merging. The only downside to this method would be the loss of experience.