Performance Indicator Case Analysis

We can assume that golfers care the most about the performance of a new golf ball, especially the distance it travels. This can be inferred from the fact that the two-piece ball, which travels the most distance, is the most popular type of golf ball.

Currently the golfers care about differentiating the “good” used golf balls from the badly performing ones but the only way they can judge a golf ball’s performance is by visual assessment of the ball, which is not easy since the newer golf balls do not show visual damage even if their performance is degraded.

If Performance Indicator’s technology were universally adopted in golf balls, the golfers would depend on the gray color of a golf ball as the sole criterion of it being “bad”. However, it also means that the golfers will assume all white used golf balls to be “good”.

Used ball market

The costs involved in the used ball markets include buying a used ball from divers and treating the ball to replace the outer layers. Since the Performance Indicator’s technology only affects the color of the outer layer of the golf ball, the costs (C) in the used ball market may vary slightly since the refinishing process would have to be replaced by either refurbishing or retreading. The price of a used golf ball (P) would remain the same but its benefit to the customer (B) would increase since a golfer would assume all white used golf balls to be “good” performing. Since the grayed outer layer can be treated by refurbishing or retreading, the assumption by Performance Indicator that the quantity of the used balls would decrease is incorrect. The quantity (Q) would remain the same, and hence, the value created would increase for the used golf ball market, due to an increase in the consumer surplus.

New ball market

The white used golf balls also include those “bad” used golf balls that were manufactured before the Performance Indicator technology was introduced, and those that have been treated by the used golf ball...