Important disclaimer, it's NOT supposed to be a karma system. It's not suppose to reflect what their actions were but how people perceive their actions. For example killing merchants stealing their stuff and then blaming it on the local bandit group that you later kill to prevent them denying your accusations would result in a fame increase despite being seen as a negative in most karmic systems.
Second thing to clarify is that it would not affect combat (unless you count preventing it in roleplay and gaining additional support on your side before battle). It would only affect the interactions with people.
OK so the way I see it is that there would be some sort of point system similar to XP but it's for the party and not the individuals. So every action that would make you famous, like catching a bandit group, eliminating a cult, catching a serial killer, helping in the defense of the city etc. Would be awarded by some fame points. In addition a bard can spend some time and gold to increase that fame gained from those events by writing a song about it or something like that (or party could commission it to someone, or many things in that angle).
Fame would be separated in tiers going from "local celebrity " to something like "living legend" determined by the amount of fame they have (note this is separate from morality. Living legend my be a legend due to his brutality and stuff but it's still an extremely famous living legend). Each tier would give you a certain bonuses. Not the biggest ones but something. I would also consider NPC having to roll to see if they know who they are basing the DC of the check (probably Wis) around how famous they are.
Some examples of the bonuses could include things like: -discounts -bonuses to things like persuasion, intimidation… -additional high risk high reward jobs that would not be trusted to some randos. -bonuses to dealing with autorities/criminal underworld.
Alternatively (or cumulatively) I would like to have a permanent bonus at each stage of fame. Like lets say that while being local celebrities party fought many, many cults. They would get a permanent advantage on intimidating cultists that heard of them. Or maybe they fought many fiends and as such they could always count on temples to shelter them and provide food and help if need arises.
Overall the intend behind this mechanic is to add a layer of gameplay where players not only look at what they do, but also at how they look while doing it.
Once again note that this is all about fame. Morality and stuff like that is supposed to be implemented in the unique in between stages of fame bonuses. You did a lot of jobs for gangs? Now you are known as trustworthy mercenary in the gangs and as such they might be more willing to not only offer you a job, but also be more inclined to help you with stuff they otherwise would not risk on perception of your trustworthiness and that you are known to repay your debts.
Overall the numbers need defining and stuff like that but the idea is here, and I want to know if you see any fundamental flaws with it. Because it's better to see them themselves. Also I think that it's not going to be an invasive system. Like if you don't think about it at all as a player Dm would just keep track of it in the background, but if you really want to dive into it you could with focusing on tasks that give a lot of fame and seeking out to maximize it.
Of course it would also have to be regional. With fame decreasing over distance from the place of origin.
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