Let's look at it from a perspective of big vs. small empires in the real world.
There are a few things that come to mind for me which could easily be gamified:
- cost of governance
- stability
- defensibility
Breaking these down:
Cost of governance. Managing a widely spread out empire should cost more, in terms of governance, than a compact one. This can easily be implemented in the same fashion as Civ IV civic cost. Then it becomes a matter of finding the right balance so that depending on the situation, it's not set in stone that a wide empire is always going to have less gold than a tall empire.
Stability: this could be in the form of game mechanic simply called "stability". If you go wide, the cost of managing your empire's stability increases. If you do this successfully, well done! You get the associated bonuses of being large (extra resources, bigger potential production capacity etc.). If you don't manage it well, a tall empire can outperform you because they are less restricted by worrying about stability and can focus their efforts on creating more efficient cities.
Defensibility: this is the easiest and happens naturally. Having a wider empire is inherently more difficult to defend because you have more land to worry about, need a larger army (with its associated upkeep), and causes diplomatic friction with neighbours who feel threatened/squeezed in.
I'd like to see these kinds of mechanics because they are situational and give players the choice to manage expansion or fail in their attempt to do so. Bad decisions about expansion leads to bad consequences.
EDIT: and there is a cost to (rapid) expansion in that you have to pour resources into maintaining your stability while going tall lets you focus your efforts in other areas (such as wonder building or more efficient research/faith/gold generation)
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