You aren’t scripted to lose. It just doesn’t matter (too much) if you lose. Winning gets you a relationship point with Melia and some different dialogue. If you want, you can go to Luck’s tent to change the difficulty to Easy. At that point, you just need to Yawn the first turn, then use four Ancient Power (three turns of sleep). Afterwards, you can change the difficulty back. This is what I did on Intense, because otherwise the fight is nearly impossible.
Regarding changing difficulty, the first change is free. I don’t know if changing the difficulty has a different fee for