Abstract: Level of Detail (LOD) techniques for real-time rendering and related perceptual issues have received a lot of attention in recent years. Researchers have also begun to look at the issue of perceptually adaptive techniques for plausible physical simulations. In this article, we are particularly interested in the problem of realistic collision simulation in scenes where large numbers of objects are colliding and processing must occur in real-time. An interruptible and therefore degradable collision-handling mechanism is used and the perceptual impact of this degradation is explored. We look for ways in which we can optimize the realism of such simulations and describe a series of psychophysical experiments that investigate different factors affecting collision perception, including eccentricity, separation, distractors, causality, and accuracy of physical response. Finally, strategies for incorporating these factors into a perceptually adaptive real-time simulation of large numbers of visually similar objects are presented.