Istari, disproportionate response doesn't rely on a larger standing military than your neighboring states. It relies on using significantly more force than the enemy used in their attack.
Using the Nation A vs B example again, I'll even set the stage, since your so insistent.
Nation A&B are geographical neighbors, sharing a large border region. Both have outposts that traditionally skirmish with each other; however B has lately developed the ambition to dominate the local region (which means A). Both A and B have rough parity in terms of economics and standing military forces.
So Nation B starts upping the frequency of border skirmishes. Most of the time no more than 10-15 men are wounded or killed in each skirmish. Nation A now has a choice. Because B has upped the ante in the skirmishes, and is starting to field more devastating equipment than usual, and has started border skirmishes with increasing frequency, A is aware that B wishes to dominate the surrounding area.
A only wants to be left in relative peace. So here are A's choices, as I see it.
1. Continue the status quo.
2. Take the problem to an international forum.
3. Use disproportionate response.
To me, 1 will lead to an eventually higher number of bodybags going home. Mostly because B will keep going, and keep upping the ante, and A will have to keep responding in kind. Eventually it ends up escalating into a wide-scale conflict.
#2 is equally horrible; the international forum will likely take months to come to a resolution that is mostly likely going to be ineffective.
Which leaves #3. Disproportionate response. Please realize I'm not advocating for A to do a scorched earth march into B, as that would really only make things worse. What I'm advocating is for A to use something suitably impressive and destructive in terms of material and economics, but not human life, to send B the message of "back off".
Ideally such a strike would be precision airstrikes against munition factories, and high-profile military targets. The idea isn't for A to go and kill everything within a certain area in B, but for A to launch deep-territory strikes against militarily valuable, high-profile targets within B's borders.
As an example-within-an-example, a stealth bomber strike against most of B's major military hangars and militarily-usable airfields would be highly effective; it also accomplishes the 2 goals of such a strike, which are:
1. Send a clear message through the use of force.
2. Minimize loss of life while maximizing destructive impact.
Note that objective 2 isn't self-contradictory; destructive impact is measured in enemy aircraft destroyed and fuel/munition supplies destroyed.
By using disproportionate force, A has ensured that B will at the very least drop off with the intensity and high frequency of border skirmishes.
Also note that such a begin-state of affairs isn't uncommon; for much of the Cold War that was the status quo between Russia and China, while since the 1950s/60s that's been the current situation of India&Pakistan.