Originally, it is because fighting games were arcade games and the machines literally only earned money whenever somebody started a new game. In-game time limits set an upper bound on how long a single play session can last, thus freeing the machine up for another player to put in some money to play. In general, time limits are also a reasonable guard against griefing behavior. When you’re selecting a fighter, it’s usually against another human being. Forcing them to wait for an exceedingly long time can be frustrating and nobody likes that.
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