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The benefit of using the merc, is it enables your team to do things without taking risk/wasting gems/using your own troops/etc. For instance, you could be allied with team B but attack team B at the same time without team B knowing who ordered the attack. Why use risk your own troops against the AI or an enemy in some province when the merc can clear out the province for ya.
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A problem here lies in the fact that by the mid-game mercs should generally be totally overrun by the human teams, I mean that any human nation will have much vaster (military and magical) possibilities than the mercs. This is actually inevitable and as we have a rather inexperienced merc player, it just becomes even more inevitable
To keep mercs position high, we need to somehow compensate this. The most obvious way to do that is increasing their capital pop (to 40000 or even more) and resources. As mercs
are not allowed to attack humans and humans
are allowed to attack mercs, this should not ruin our so-beloved balance.