The AI cheats, but within limits. For example, the game never has a problem detecting a sub from a merchant within a convoy, whether surfaced or not... Got no problem shooting through it's own sheep, either.
Although, living on such a small boat for months at a time with no real showers for anyone, is not something I'd ever what to experience or even want to imagine. Not to mention the moldy food, the lack of fresh air and the knowledge that you may be in that boat, forever.
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