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The game does not always let you take all cities after a war. So short of eliminating them altogether, vassalage is a way to severely weaken their position. But obviously they still exist, can take territory, etc.
Vassalage is a bit similar to an alliance, but the benefits lean mostly one way. Still, it also means a peace guarantee, so if you reckon they will annoy you later and you might want to fight them, vassalage is an obstacle.
It works best if you can't eliminate them outright, while the other empire has nowhere to expand anyway, or if your own empire is already so extended that you don't mind if they take some territory.
There's also lots of bonuses based on trade. Obvioulsy killing empires and taking their cities means no trade either, so you may prefer weak neighbours over no neighbours at all. EDIT: Apparently this does not apply, since vassal resources are shared automatically with no trade routes established.
As a Vassal, the empire must provide you a Tribute (in the form of gold per turn).
As a Liege, you controls the Diplomacy, the Religion and the Treaties of yours vassals (treaties negotiated with a Liege will be applied to its Vassals as well, and declaring war on a Liege will also drag its Vassals into the same war). On the other hand, Grievances and Demands caused or received the Vassal must be handled by the Liege.
And all the strategic and luxury resources of the Vassal and the Liege are shared : no purchase or trade route can be established between you and your vassals.
To finish, if a Vassal want to be free, it've to ask for it to you (you can refuse and sometime, it will lead to a war for freedom) or you can grant it in using "Grant freedom" to free your vassals.
- gold tribute
- shared resources
Cons:
- still not your territory
The question is mostly what's better - to get it as vassal or assimilate instead. By getting the territory to yourself you increase some costs and may go too far beyond city limit. Vassals help to avoid these.
and yea the vassal gets the set us free grievance once either the liege or the vassal changes culture, its a one turn thingy to demand as i saw as vassal not the usual 10turns can be easily missed
probably the biggest issue that the grievances triggered by the vassal to 3rd party is handled by the liege, so you pissed on someone by taking that territory as a vassal and then the liege gives it to them and you just watch :)
Pro: Fake.
Cons: All.
EDIT:
What breaks the option is the war point cost a lot too high for some temporary bonus, and you have zero way to manage relationship to a vassal hence it's dead it will enter in war with you.
So if you ever encounter an actually threatening enemy, just kill them.
OK so why vassal then?
That said the solution isn't clear but between vassalize and annihilate, vassal better be very good to worth it. This is the reality, and I wonder what had in mind players that complained on old vassals version, sigh, player, players, not always good designers if you ask me.
For now I annihilate. Maybe devs will adjust and make it more useful.
I don't know how make it work. That said I didn't tried since some time and noticed that now I don't see vassals enter in war against AI owner.
At next play I could try but it's not easy to reach the war points for war support. It's rare to enter in conflict with small AI.
I might try a vassal again just to see how it works.