This process tactic occurs when one party came to the table with ambiguous requirements and the deal is between unequal parties. The disadvantaged party may make greater concessions than they wish to appease the advantaged party, which then comes back with another demand greater than the first. Behaviorally, if you seem weak by agreeing to every demand out of the box, expect more until you push back. To be perceived as a “yes” man or woman is toxic to the relationship. Do not take escalating demands lightly, as they can and have rendered organizations insolvent.
To put the above more simply, escalating demands are seen when an opponent asks for X, it is agreed to, and then they ask for X+Y.
Every clause in every contract has a cost, either tangible or related to risk. Meeting increased demands will cost time at the very least, and may require land, labor, or capital. To cover the cost, risk, or inconvenience created by each new demand, you must ask for more in response. Change the contract, change the cost, or say no to additional demands. Focus on what you really need.