Screaming children NOT tolerated

This video that I came across on cnn.com describes how a restaurant in North Carolina instituted a policy that doesn’t allow screaming children; the sign at the entrance states, “screaming children will not be tolerated.” Brenda Armes, the restaurant’s owner, says she is tired of customers complaining about the screaming children; in other words, she believes that screaming children impose external costs on customers that are attempting to have a meal in peace. One could object to this policy by saying that it also keeps a lot of customers away. One example would be a mother of two toddlers that was also interviewed. She vehemently expressed her disapproval and said that “personally, if I saw that I wouldn’t come in your restaurant.” Mrs. Armes though claims that it has “brought in more customers that it’s ever kept away.” [How would she measure this?]

In order to deal with this negative externality in consumption (of the restaurant’s services/property/goods) the restaurant erected this harsh rule. Perhaps an alternative solution to this dilemma would be a voluntary agreement between the restaurant owners and customers with screaming children. This contract would involve having customers pay for the external cost produced by their screaming kids so that it would compensate the restaurant’s loss. A price could be determined at a point at which the marginal cost of screaming children on the restaurant’s revenue equals the marginal benefit that customers enjoy while eating at the restaurant. One problem with this solution is that it would be difficult to determine the exact cost of having screaming children at the restaurant. So should Mrs. Armes reconsider her policy? Or should she also be allowed to reject people that smell bad?