The purpose of this paper is to generalize the concept of contractibility o
f decentralized control laws in the Inclusion Principle. After a system wit
h overlapping subsystems is expanded into a larger space, and decentralized
control laws are formulated for the disjoint subsystems, the laws need to
be contracted for implementation in the original space. We propose broader
definitions of restriction and aggregation in the framework of inclusion, w
hich provide more flexibility in the contraction phase of the expansion-con
traction process. In particular, we discuss contractibility conditions for
dynamic output controllers including state observers which have been of spe
cial interest in applications. (C) 2001 Elsevier Science B.V. All rights re
served.