I go to concerts regularly, and have been asked by some young persons whether they should applaud whenever the music stops. I said to them that applause is the appreciation shown to the performers. Appreciation is never too much. The artists will be glad when their performance is appreciated. However, people have devised some rules on when the audience could applaud. This has become etiquette, created by some authoritative people to govern the behaviour of others. Just two hundred years ago, the situation was different. Music in concerts was enjoyed by the upper class people. They were enthusiastic; popular artists and prima donna were like pop stars. The audience applauded and shouted to show appreciation whenever they liked. Not only they could applaud at the end of a movement when it was well played, people would applaud after a good cadenza when the music had not finished. More commonly seen, still seen today, people would applaud when the prima donna sang a dramatic soprano aria during an opera, even when the scene was still going on. The prima donna would stop the acting for a moment and deliver some kisses.
In the 19th century, commerce boomed and merchants got rich. The middle class gained momentum and they moved upstream and entered the cultural, artistic and performance scene. The mixing of these people with the nobles created some friction. I think that was about the period when etiquette was introduced, just to show the upper class had better manners. Concerts became more formal with some people thought they were like going to church. People dressed formally for the occasion, spoke quietly and politely, and especially behaved well and only applaud at the right moment. Besides being polite, it could also display a deep knowledge on the music.
In fact, performing arts should not be like that. Arts should be introduced to and enjoyed by all people, in a harmonious and joyful atmosphere instead of a funeral atmosphere. The tradition of cheering, applauding and doing something else freely can be found in many types of performing arts, like xiqu, jazz concerts, pop concerts, dance, circus. The artists could also interact with the audience freely. Announcing the applause rules before a classical music concert only make it more classical, if you know what I mean. Notwithstanding the announcement, there were still people applauding from time to time. Some were not just ignorant, but deliberate. I think it is a form of civil disobedience.
On economics, it is not quite appropriate to compare applauding to the annoyance of baby crying, both are not externalities. The audience are the stakeholders. They are the market players instead of influencing or being influenced outside the loop. Applause is part of the transaction. It can be said as a kind of reward for service rendered. In some cases, applause can be quantitative and can be measured as the value of the performance. If the audience applaud loud and long enough, they could get extra service in the form of an encore.