Although Toto Wolff says he is "for" a cost cap, the Mercedes chief concedes that some big teams just "could not" adhere to it.
FIA President Jean Todt had planned to introduce a cost cap into Formula One, however, a few weeks ago announced it would not take place.
The Frenchman blamed F1's Strategy Group, which comprises six teams including Mercedes.
The six have come in for some criticism from F1's smaller teams, who fear for their future in the sport.
Wolff, though, has defended his team's stance.
"I was for a cost cap actually," Wolff told ESPN. "But we realised some of the other big teams could not follow that path.
"Ferrari are a good example as they have everything in one entity, the road car business and F1, and it's difficult for them to have everything screened.
"It doesn't make sense to go against two or three of the big teams just for the sake of the principal of the cost cap, so it's worth following it up where everybody can do"
The Austrian reckons the best way to curb rising costs without introducing a cap is through "sporting and technical regulations" which he says are the "right way" to F1 to go.
"We've seen in the past that it worked," he added. "The testing was massively reduced, for example. There are many things we can do so we are working at the moment to try and find the best tools when we next get together to try to implement that.
"We are for a cost cap, or a ceiling, so we are not running away in a spending war with the other teams, and for a glide path downwards so we can reduce the gap between the larger and smaller teams."