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It seems that memory cannot be overprovisioned. At least on OpenStack layer as KVM itself can overprovision without any problems. CPU can be overprovisioned by setting "max_cores=N" in nova.conf on compute node to the number you want.

But in any case Mem/CPU counters are the hard limits and as soon as they are reached, new instance creation will fail. At least this is what happens with SimpleScheduler.