Actually it depends on what they mean by targets damage. You are assuming at this point it means its current damage. So as you say if it has base 1000, then it should drop to 500, then 250 consecutively.
However, the way it is right now appears that the damage reduction is based on base damage, not the damage at the time. Therefore it goes like this: if dino has base of 1000 it drops to 500, then when used consecutively it reduces the base again by 50%, i.e. 500.
So the question is, does the damage reduction reduce the base always, or is it meant to reduce the current damage. If the former, then it is not a bug.