Instituting a Penalty for Concessions

[Jonathan Feliciano]

In @Brandon Turner 's The Book On Rental Property Investing, Turner touches upon the art of negotiating a deal.

He suggests "instituting a penalty whenever the other party asks for a concession."

How and when do you institute penalties? Are penalties an official thing you put in your letter of intent? Or is it more like an unofficial thing, i.e. waiting a week to respond to the seller's concession?

Looking forward to reading your responses.