In my experience many (though not all) deadlines are simple mitigation of Parkinson's Law[0], not exploitation of workers. I don't work in the commercial game industry though, so YMMV.
There are a number of (good) reasons for deadlines--even deadlines that are a bit of a stretch goal.
- One is as you say. Absent a deadline, a lot of projects will meander along forever iterating endlessly to refine and improve or even just dither around. A deadline serves as a forcing function to decide what's actually important and ship it.
- Another is that projects often don't exist in isolation. Even if they are somewhat standalone, like a game, they certainly don't exist outside of revenue targets, big retail selling seasons, advertising plans, etc. It often isn't practical to say "It will be done when it's done and you'll be the first to know."
[0] https://en.wikipedia.org/wiki/Parkinson%27s_law