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It's partly a game error.

The game does not show you whenever DIP is increased or reduced by 1, only 2 or more.

Weird, eh? Nobody knows why. Don't let it fool you, the increases and decreases are there.
 
Okay! I still think -2 badboy is too much though, but it's not that big, it just makes it not worth it to choose the other two options (though I'm not sure how much bb would be lost through the diplo loss, couldn't be that much though...) maybe it's just that i'm a war monger!
 
I have altered the text of the events to indicate the problem and the stat changes for each of the options.

There are deliberately three approaches, one to suit players with a lot of BB. If you didn't have any BB, option c would be pretty weak. And, as you say, others may have a different playing style. :D