I did some quick calculations to figure out the probability of drawing Merchant Camp plus Smithy in your starting hand, and then comparing to Village plus Smithy. This is imagining some sort of judgment match and you can only pick one or the other. There are 3 free parameters in the calculation, the number of villages/merchant camps, the number of Smithies, and the number of other stop cards.
Generally, Merchant Camp has better probabilities compared to Village when you have few villages/merchant camps compared to smithies, and when you have higher stop card density. At 10 stop cards, you're ambivalent when there are about 5 smithies and 5 villages/merchant camps. When you have a lot of Merchant Camps (say, 4 more Merchant Camps than Smithies in a deck with 10 stop cards), it's better not to topdeck, and you'd much rather they be villages.
Of course, the calculation doesn't cover what happens after the first village/smithy collision.
In the head to head with Village, I think Merchant Camp is favored by the following:
- Bigger draw cards, which support higher stop card densities.
- Thinner decks with fewer components. These support a higher stop card density because the starting 5 card hand is a greater proportion of your draw.
- Non-terminal payoff. Terminal payoff requires more merchant camps, and if you have that many you'd really rather they be villages.
But really it probably shines outside of the deck-drawing paradigm. For instance, suppose you shuffle once every N turns. The number of terminals your deck can support, with perfect shuffle luck, is N plus the number of villages. So, fewer shuffles per turn means you can support a higher terminal to splitter ratio, and that favors Merchant Camp. Furthermore, you can play a single Merchant camp N times per shuffle. So you could support more terminals more reliably with fewer components.