as a demon enthusiast, I'll say...
there are four main selection criteria:
1. your opponent.
2. tactics.
3. the map and game conditions.
4. the hero's development path.
I don't see any obvious advantages of one upgrade over another... (using hounds as an example, the "fiery" breath only makes sense against a player (the chance of a successful breath is very low, plus or minus the probability of hitting your own units), while -1 damage works everywhere, especially in large-scale battles... Cerberuses, on the other hand, offer a confident and stable attack with noticeable damage)
the same applies to others...
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*p.s. Broodlings reliably halve a unit of goblins, peasants, skeletons, or imps.
*it is not recommended to use demons in a squad or when there are "foreign" troops.
*the Archdemon's skill is very useful from a tactical point of view.
*a squad of Cave Lords does an excellent job against outposts and strong neutrals.
*imps and lesser devils in large numbers significantly reduce losses from enemy magic.
*lesser devils are an excellent companion for druids and archmages... (by the way, replenishing the Inferno army with them is always a good idea)
*the downsides of Inferno can be offset by appropriate artifacts.
They don't halve, because resistance increases. Archmages and druids severely damage morale.