High stocking does discourage fighting because it more energy is wasted if a fish wants to chase other fish away constantly,however there is a definite limit on how many you can get away with while not stressing fish in some way.
People may mean different things when using the word overcrowding. There is an effective level that manages aggression without making your tank look like a goldfish feeder tank. For example, I like 12 males in a 48x18 75G and 20 fish (4 species 1m:4f of each) that mature <= six inches in the same tank when stocking mixed gender (whether mbuna or haps or peacocks). Certain species don't fit that scheme, but for the sake of discussion as to what overcrowding just enough to manage aggression means.