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I have noticed the ability of the AI to learn. I have modded the game to boost coastal resources and yields of terrain, and now the AI is putting most of the cities on the coast to take advantage of the boosts. However, it is still not putting cities on rivers or fresh water sources, which is a bug that could be fixed. I hate building aqueducts all of the time. I know some guys with torch me for the aqueducts, but I prefer larger cities over lots of cities to micromanage.
 
Soren built a very solid valuation model for the AI so it is adaptable to mods. If you boost spearman to have 100 defense, it will build spearmen for the rest of the game. That's an extreme example of course, but the AI isn't tied to any buildings.

Civs has preferences and such but I suspect the hardcore modders will have a better view of the nuances of how those preferences affect each civ's building selection. In the end though they're just modifiers to an underlying valuation model that is shared by all the AIs and your city governors (for build orders)

Back in 2001 Apolyton doing an interview with Soren and Soren saying that there's a hierarchical AI with leader AI taking care of macro stuff like diplomacy, who to attack, where to put units and city AI taking care of what to build for that city.

Apolyton said:
Soren Johnson: The AI makes decisions on many different levels. A leader AI keeps track of high-level concepts, like whether enough science is being generated or which civ is the biggest threat. A city AI decides which units to build for that area of the world and how to manage the city itself. The unit AI is itself split into multiple levels, first determining an ideal destination and then calculating the best possible path.

Furthermore, the different AI levels communicate between each other. For example, the unit AI controlling a tank might ask the leader AI which enemy city would be best to attack. After receiving a response, the unit AI would determine its own best path to the destination. Thus, the AI is able to organize a large group of units while keeping the discrete game decisions at a lower level.

It's really a very neat AI, considering the basis for the Civ3 AI was build nearly 7 years ago now!
 
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