In a number of cases, the increased cost of the top-tier unit outweighs the increase in effectiveness. I tend to run a lot of high-level units, but many of them are a step or two below the top tier, so a mix of top, high, and mid tier units will perform almost as well, at a fraction of the cost. That's even more pronounced when you run a mixed army from different factions, so units from one faction can cover for the weaknesses of another faction.
Examples: Swadian Men at Arms provide 3/4 of the effectiveness of Swadian Knights, at 2/3 the cost. Khergit Horsemen are nearly as effective as Khergit Horse Archers, which aren't all that much weaker than Veteran Horse Archers, but cost significantly less. If I'm taking on forces larger than my own 50-80, and only losing 0-2 men plus a handful of wounded in each battle, how many more upgrades to top tier do I need?