It happens sometimes. Usually it's because of one of two situations:
1) The company was on the fence about wanting you anyway, and negotiating takes you from the "maybe kinda sorta want to work with" to the "don't want to work with" pile.
2) The company is looking for people who don't question authority and don't stick up for their own interests.
Both of these are red flags. It's not really a matter of ethics - they're completely within their rights to withdraw an offer for any reason - but it's a matter of "Would you really want to work there anyway?" For both corporations and individuals, it usually leads to a smoother life if you only surround yourself with people who really value you.
1) The company was on the fence about wanting you anyway, and negotiating takes you from the "maybe kinda sorta want to work with" to the "don't want to work with" pile.
2) The company is looking for people who don't question authority and don't stick up for their own interests.
Both of these are red flags. It's not really a matter of ethics - they're completely within their rights to withdraw an offer for any reason - but it's a matter of "Would you really want to work there anyway?" For both corporations and individuals, it usually leads to a smoother life if you only surround yourself with people who really value you.