An escalation structure results from two or more competing entities with the competition taking them to somewhere none of them want to be. There is a also a video for this insight which is a component of the Systems Archetypes Course.
This structure is based on two interacting balancing loops which provide the goals for each other and because of the paranoid behavior of the participants it oscillates back and forth as it grows, each one trying to out do the other.
When you unpack the structure the reason for it's growth become far more evident as the two interacting balancing loops actually act as a single reinforcing loop, typically taking each participant somewhere they don't want to be.
The simulation version of this structure has a few added pieces to set the activity levels and the multiplier.
If we run this simulation with the initial settings on the right Anne starts ahead of Ted and invests more activity on a periodic basis, and with no perceived threat, continues to get further ahead of Ted.
Notice that with [threat] = 2 Ted almost catches up each time though since the level of activity is dependent on the perceived threat and Anne continues to progress Ted never quite catches up.
Notice that with [threat] = 2.4 the results tend to oscillate. And if you continue to increase the threat the structure will get more and more chaotic. Part of this behavior is because [Time Step] = 1 simulating a delay in the time it takes each to find out about the other's change in results.
Strategy: There is only one approach to dealing with this that makes any real sense; 1) Stop the insanity! Because competition is taking both parties somewhere neither wants to be they have to agree to stop competing with each other.
I encourage you to interact with the model and test the behavior of the structure changing the threat level. Also experiment with changing the Time Step = 0.5, 0.25 and see if you understand the behavior that results.