Defense Grid: more towers or upgrades?

I asked devs the same question and turned out there is no difference from both cost and damage points of views (except for temporals and commander towers). I upgrade towers that are located in most valuable places (i.e. where aliens pass several times) where space is limited.

Quote from a dev:

The choice is actually entirely up to you.

level 1 gun tower - cost 100

level 2 gun tower - cost 200 (total paid = 300)

level 3 gun tower - cost 400 (total paid = 700)

The damage a level 2 gun tower does is exactly 3 times as much as a level 1 gun tower. The damage a level 3 gun tower is exactly 7 times as much as a level 1 gun tower.

Essentially, a single level 3 gun tower is equal to seven level 1 gun towers. They do the same total damage and the total cost of each are also the same.

If you're building a maze, the seven towers is probably the better choice. If you're limited on space, or you have a kill zone setup with a temporal tower, then perhaps the full upgraded gun tower is the better choice.

It really depends on your playstyle and the choices you make for any given map.

By the way, the above example is true for all towers. (Except the Temporal and Command tower, they're special.)

I found that upgrading always works better for me than to place a lot of towers
Check out what each upgrade does, it shows how much the damage, rate of fire, and range would be increased when you upgrade; I think it becomes clear when you compare damage vs cost.

A level 3 (red) gun tower for example, is way more powerful than a lot level one (green) ones.

Here's an interesting article on that tower, and some design decisions.

There are challenges where you can only build level 1 towers, play that and experience first hand how the gameplay changes.