I notice playing that game that whenever the area occupied by my units overlaps an icon appears over them indicating that both units are being affected by an "overcrowded" effect. My understanding is that the overcrowding effect reduces the attack of each unit so that their combined attack equals the sum of a single unit without the overcrowded effect. While I like the idea behind this feature I've seen there are a few bugs behind it that work against the player.

First, I've noticed that even when the flanks of my units nearly overlap they suffer from the effect.

Second, the perk doesn't appear to affect the ai the way it does the player. I've seen repeatedly that the ai will stack units up on top of each other and kill even elite units such as the sacred band with multiple skirmishers in support. I've never seen the overcrowded icon appear over the ai units like I've seen other icons (low morale, no food, etc.)

Do ai units actually suffer from overcrowding or am I just confused?

If they aren't, is this by design, or was it overlooked in development? How is overcrowding being handled in Hegemony Rome?

I don't think they do suffer from overcrowding. I have seen them stack (one time) something like 10 peltasts on top of each other while I was assaulting Corinth once and they held me off very easily doing so. This led to me simply waiting for them to go back into their city and then I rushed to their city gates trapping them inside. This is why I think the devs probably exempted the AI from overcrowding. It is probably too hard for the AI to manage this, while the player has many things at their command to overcome it. One pretty hilarious thing I saw was that in the entrance to Asia Minor on the Hellespont in the city of Abydos, the Persians were stacking something like 20 ballistas (and nothing else.) Periodically they would attack the crossing with all of them stacked on top of each other and do serious damage to all of the units I had sitting there to defend including 2 allied hoplites, some skirmishers, a phalanx and something like 6 ballistas of my own!

Good to know. I had thought that would be the most likely reason for such an occurrence. I suppose I'll have to be more careful fighting in mountainous territory until Rome arrives.

Thank you for the response. I look forward to the improved engine and game mechanics in your next title.

There are good news, especially that the overcrowding debuff is working like the out-of-money debuff (and partially also the out-of-food-debuff), the worse it is, the more it affects your units.

Another solution was to make formations auto-detect overlapping and make the affected units loosen their formation, so that they've all got enough space (similar to that, what whole formations already do, but really only in the affected parts). That would make maneuvres like an attack in a v-formation even more effective, and the fighters' positions even more dynamic.