Sunday, August 09, 2009

Banning Laptops from Coffee Shops?

Wall Street Journal has a story, picked up by Chris Matyszczyk at cnet, about coffee shops discouraging laptop use.

Could these trends ever become widespread?

The economics here are the same as air conditioning, free parking, or the IKEA ferry, or any other service extended for free to intice patrons. A business provides free parking to encourage patrons to buy their primary goods. There are some differences, wifi has a more regular cost of upkeep, for one, but even parking lots will require periodic service and repair given time. Each one provides a benefit that will be attractive to customers not really interested in buying your products, but just interested in the service.

So long as the business attracted exceeds the cost of upkeep, you'll want to keep paying for the service. It will run into adverse selection problems. You have three options:
1) keep the service open, knowing that the business you attract outstrips its cost, despite free riders
2) ditch the service
3) try to exclude the free riders ("these spaces reserved for customers only" signs, limited access to the internet or regulations about staying with laptops during peak hours)

None of these solutions is clearly the best for all situations. The value of each approach is dependent upon a number of variables (how much business is attracted, how much you might alienate potential customers by attacking free riders, how much the cost scales with greater use...). Even from cafe to cafe, these factors will vary.

So I don't see one approach, like banning laptops, becoming the universal response in all cafes, without some big shift in the fundamental economics.