It seems tier 1 units are OP. They are strong enough and extremely cheap. Tier 1 units are much more useful than tier 2 units.
2-3 Goblin Archers are enough to defeat Werewolves or Demons. Loot from Werewolf lair is 150-200 gold. Loot from Demon lair (imp-mages) is 150-200 mana and super spell like "Summon Earth Elemental". Goblin Archers cost 20 gold and have 7 Attack. Goblin Sharpshooters cost 120 gold, have 10 Attack and suffer from lighting combo. So I don't see reasons to use Goblin Sharpshooters. Better I build hordes of Goblin Archers from many cities.
It is of course true that T1 units are more cost effective than T2 units if you do a simple comparison of base level units. Using your example, a Goblin Archer is much more damaging for its cost and maintenace than a Goblin Sharpshooter. The problem with the overpowered effect of the Lightning combo is another matter and that is something that needs fixing for MP.
But what you're missing is that a Goblin Archer is limited to a range of 2 and so only a limited number can be brought to bear on a given target. The Sharpshooter may only offer 45% more damage but it is concentrated onto one tile. It might be true that 3 Goblin Archers provide more firepower than 2 Sharpshooters but what if only 2 units can get into range due to terrain or movement restrictions? The Sharpshooters clearly win in that situation.
Then there is the significant advantage once perks are added, be they expensive ones costing gold, or spells costing mana and casting turns or the hard earned perks from experience. All these perks are valuable and they are better if applied to a Goblin Sharpshooter than a Goblin Archer, they do more damage and are better protected (due to more HP) against counter attack. Once you have unit that is level 4, has Frost weapon cast on it and you've spent 200 gold buying various perks it is absurd to suggest that it is better as a T1 rather than take its upgrade to T2 where it has more damage and more HP. The cost of upgrading is small compared to the value of the unit, and it is a very cost effective way to increase the value of the unit, only fear of the Lightning combo would hold back. Not all upgrades from T1 to T2 increases the risk, for instance the Rogue to Cutthroat upgrade is nearly always worthwhile for a well perked unit. What I do, and I expect most other players do too, is build T1 units and then when the right time is reached upgrade to T2 to consolidate the investment in the perks.
So you are not entirely correct to suggest that the T1 units are OP versus their T2 counterparts. That only applies when comparing base level units. As soon as expensive perks are considered or there is not enough room to use a lot of weak but cost effective T1 units then the advantages quickly disappear or at least become more complicated to assess. What you suggest might be true in some early game situations in MP (where games often don't go on for long anyway) but in the longer SP games I play the value of basic T1 units rapidly falls off. Once I have a lot of cities a few T1 units are useful as garrisons in every third city say, to protect against the monster events and quests that pop up. But they are not that useful in real wars against the AI or clearing other worlds.
T1 units without perks often die in one shot from a Greater Fire Elemental or a Dragon, and easily get killed if there are several monsters that gang up on them due to low HP so they are not worth putting in dangerous positions. If you put enough perks on them to survive those situations then you may as well upgrade them, it is often the most cost effective way to improve a unit. Also there is the time and trouble aspect; even though they are cost effective it is not worth the effort to move a T1 unit for several turns across the board just so it can die in one turn. If I use disposable units that are unperked T1s in the middle or late game they tend to be generated locally and if they survive become the garrison for that area.
Anyway, those are my comments on the relative value of T1 units, mostly in SP situations but I think much of it would apply to a MP game that lasted long enough.
JJ