This in particular is the causative factor that killed off a lot of "realistic faction-based" approaches that were tried out for games in the past (ranging all the way from Freelancer to Oblivion). The combination of a) certain strategies (expansionism, xenophobism) being unilaterally superior from a metagaming perspective, combined with b) the inability of other factions to adopt proactive, as opposed to reactive, approaches to diplomacy means that a lot of "strong AI"-like systems end up deliberately handicapped by randomness, or (more commonly) removed altogether for playability reasons. Don't want to see the same fate here.else we get AI Darwinism, where the "fittest" (or probably, the most aggressive) AI eats all of the lesser ones over the course of a few days. I imagine the game to become incredibly unfun when all you encounter is xenophobic megafactions that have adopted a "kill on sight" philosophy on anything that doesn't belong to the faction, and is large and willing enough to throw hundreds of ships at the player.
For this particular scenario, one way to preserve at least some balance would be some measure of threat -- even though a xenophobic megafaction would certainly win against a minor fringe faction, the lack of threat combined with a (perceived) lack of reward, based on their intelligence*, makes them less likely to engage. That other megafaction in the corner of the galaxy, however... The same reasoning would apply to a player, of course.
Threat includes:
- Contested systems (most important)
- Proximity
- Total/rate of change of population
- Total/rate of change of military assets
- Position of military assets
- Cultural influence (ala SoaSE style)
Reward includes:
- Estimated value of current holdings
- Systems
- Populations
- Trade volume
- Technology
- Resources
*An interesting survival strategy therefore would be to present oneself as unappetizing of a target as possible. Intentionally nuke planets to create a desolate, radioactive wasteland, and instead have your uber gold mine deep in space somewhere beyond the fringe.