I am posting another answer to evaluate your reasoning. I might have added this to my previous post but I fear that it will make it necessarily long.
Is it that because in the first case, the pressure on the ball is more than in the second case, so it compresses more in the first case than in the second. So we can see, more of the kinetic energy of the ball converts to potential energy(and therefore again into kinetic energy) due to compression... in the first case than it does in the second case... Is it the reason for more damping in the second case...?
Is it that because in the first case, the pressure on the ball is more than in the second case, so it compresses more in the first case than in the second.
See pressure is just Force per unit area. I do not understand why you prefer to call it pressure.Anyways it does not make a difference.
So we can see, more of the kinetic energy of the ball converts to potential energy(and therefore again into kinetic energy) due to compression... in the first case than it does in the second case...
Well if you take the system to be only ball then you are supplying energy to the system by punching. Your argument has a major flaw that you do not take into account this energy.Assuming collision to be elastic - ball regains shape completely. The initial and final Kinetic Energy,in your argument, will be same following momentum conservation and the fact that you did not gain any noticeable velocity while punching the ball.
When you take into account the energy supplied,the Kinetic energy may be different.
Is it the reason for more damping in the second case...?
It does not matter how much Kinetic Energy is converted into Potential energy during the collision,assumed elastic as there will no Potential energy in the ball after collision.This means that the velocity of the ball does not depend upon how much Kinetic Energy is converted into Potential energy during the collision and only on the energy supplied by your action.
is there any other way of explaining the damping?
Tons.
Finally the fact that you can supply more energy to the system by punching is because you fear that you might fracture your hand in attempt of suppling same energy by palm.