Here is a brief version of the story. If you wish a longer version, read this.

Consider planet Xemya. On Xemya, just like on Earth, there are countries, and believe it or not, it is not unheard of for Xemyans to wage war. There are two neighbouring countries on Xemya, called Apollonia and Tysq. Tysq is a major power, Apollonia is not. Other Xemyan powers include Albania (by a strange coincidence there is a country called Albania on Xemya), Coqauvin, Ruritania, Sipango, and Ammer-Ku.

At some point in troubled Xemya's history, Tysq goes nasty and demands that Apollonia hand over to them a spaceport, over which it - Apollonia that is - has some sort of dubious half-authority, by way of exercising a mandate of an international peace-keeping organisation (whose peace-keeping successes are comparable with those of UN on Earth). Tysq's diplomats left Apollonians in no doubt that should they fail to meet their demand, bad things of the military sort are sure to happen to Apollonia.

This worries Apollonian strategists quite a lot. They are well aware of the fact that Apollonia is no match for Tysq, which is quickly growing stronger and more aggresive. Not a year has passed since Tysq gave a similar ultimatum to Tscheslavia. Under diplomatic pressure, mainly from Albania and Coqauvin, Tscheslavia duly complied, yet it was invaded and occupied by Tysq.

Apollonia hastily arranges some alliances, important ones with Albania and Coqauvin. Indeed, Albania and Coqauvin propose an alliance themselves, stating their unvawering support for Apollonia and encouraging her to stand firm. This gives hope to Apollonian populace, but the strategists are not all that optimistic. It is their job to consider worst-case scenarios, and such scenarios are looking grim. To begin with, a great war seems inevitable. There is just too much tension around:

Against this pleasant background, Apollonia's strategists set out to work. The question is: accept or reject?

Acceptance means surrender. But at this cost Apollonia could perhaps avoid an immediate and disastrous war. Perhaps, because Tysq's real intentions may not be as minimalistic as the ultimatum suggests.

Rejection means war. But an alliance of Apollonia, Albania and Coqauvin theoretically has enough power to defeat Tysq. Theoretically, because military alliances on Xemya have an unpleasant tendency to be unreliable and unstable.

What to do? Where conventional wisdom fails, unconventional wisdom is available, in the form of an oracle. To the oracle the strategists go.

There is the usual fuss at the beginning. Oracles have to live, too, so a little donation is always welcome, but then the oracle accepts the enquiry and falls into trance. She emerges with two questions:

How likely do you think it is that Tysq will attack you no matter what you do?
How do you estimate the price of surrender, in present circumstances?

The oracle, as you might have guessed, applies some simple game theory. Here is more on that.