So you're working at your computer, everything is humming along just fine, and then when you double-click a file, instead of launching the associated application, Windows asks you what program you want to use to launch the document. Why doesn't it just follow the instructions you gave it already?
A customer installed a new program that supports XYZ files, but was careful not to let that program take over as the XYZ file handler. But when they double-click a XYZ file, they still get the "How do you want to open this file?" dialog.
"Could you please confirm whether this is expected behavior? If so, what is it that changes when a new app is installed that triggers this prompt?"
Yes, this is expected.
If an app is installed that registers support for a file type, then the next time you launch a file of that type, Windows will confirm that you want to stay with the app you have, rather than switch to the new one.
You should be prompted only once per file type, at least until you install another app that registers for that file type.
Why does Windows prompt you one more time after installing a program that supports the file type?
Well, you may have installed that program with the intention of making it the default handler. Or conversely, a recently-installed program may have forced itself as the default handler (possibly by nefarious means), and this gives you a chance to switch it back.
In both cases, the dialog saves you a trip to the Choose default apps by file type settings page, which is important because most users don't even realize that such a page even exists.