A simulation could be used to resolve conflicts between nations, possibly, some of the time. You'd have a challenge making the results binding (what's to keep the nation that winds up holding the short end of the stick from going rogue?) but at least in principle it could work. As a real world precedent for how this might work, I'd cite lacrosse.
Lacrosse is a game of Native American origin. As stated here, it was also historically much more than a game. To wit:
The full-contact, fast-moving sport of lacrosse was ideal for training young Native Americans in the art of battle, but lacrosse competitions also took the place of battle. When disputes arose over land or resources, tribes would agree to a contest instead of rushing into war. These contests would be scheduled at agreeable times for both tribes and would end the dispute with less bloodshed, though broken bones and severe injuries were not uncommon, and death was not unheard of in the contests.
The two big things to keep in mind here:
1. For the results to be meaningful, all involved parties must stand by them. That means that the losing nation must hold up their end of the bargain. You could rely on the word of the participants here (is your society a very honor bound one?), but perhaps some sort of U.N. on steroids and a set of very punitive consequences for disregarding the simulation's outcome would work in the absence of honorable participants. I'm thinking here of something along the lines of the prohibition on the use of atomics in Dune:
In the initial Dune novels, the Great Houses of the Landsraad own "family atomics" as heirlooms, keeping a secure, hidden cache as weapons of last resort in their wars. Though such possession is necessary to secure power, the use of atomics against humans violates the chief prohibition of the Great Convention, the "universal truce enforced under the power balance maintained by the Guild, the Great Houses, and the Imperium". 164
<PERSON> notes in Dune that "The language of the Great Convention is clear enough: Use of atomics against humans shall be cause for planetary obliteration."
1. Simulations are by their nature limited in their ability to reflect reality. Even if by simulation you mean "we are creating the Matrix", well, if the participants don't die in real life when they die in the simulation then it is very likely they will behave differently. In addition, the assumptions of the people who created the simulation and who are refereeing the simulation will color its results. For an example of the latter, check out the U.S. military's Millennium Challenge war game:
Red received an ultimatum from Blue, essentially a surrender document, demanding a response within 24 hours. Thus warned of Blue's approach, Red used a fleet of small boats to determine the position of Blue's fleet by the second day of the exercise. In a preemptive strike, Red launched a massive salvo of cruise missiles that overwhelmed the Blue forces' electronic sensors and destroyed sixteen warships. This included one aircraft carrier, ten cruisers and five of six amphibious ships. An equivalent success in a real conflict would have resulted in the deaths of over 20,000 service personnel. Soon after the cruise missile offensive, another significant portion of Blue's navy was "sunk" by an armada of small Red boats, which carried out both conventional and suicide attacks that capitalized on Blue's inability to detect them as well as expected.
At this point, the exercise was suspended, <PERSON>'s ships were "re-floated", and the rules of engagement were changed
So the referees running the exercise decided that the strategy chosen by <PERSON> ran counter to the spirit of the exercise and they reversed the outcome of <PERSON>'s devastating strategy. What happens when a simulation participant does something "unfair"?
In summary, I think a story could realistically be built around a society that had decided war was better off simulated. I imagine there's some interesting narrative ground to be covered in exploring the loopholes participants might use as well as what would happen if a nation went rogue after losing the simulation and the society was faced with its first real war in generations. 44