The idea is that if the coin flip goes in the player’s favor, they win double their bet. After winning, they can either collect their winnings, or risk them all on another coin flip to have a chance at doubling them. The initial bet is fixed at, let’s say $1.
Mathematically, this seems like a fair game. The expected value of each individual round is zero for both house and player.
Intuitively, though, I can’t shake the notion that the player will tend to keep flipping until they lose. In theory, it isn’t the wrong decision to keep flipping since the expected value of the flip doesn’t change, but it feels like it is.
Any insight?
If everyone has the same amount of starting capital it is a fair game assuming both can opt out at any time.
That said, the house appears to not be able to opt out (they definitely can, you just don’t think about that part), and the house has more capital. For them each time someone plays a round there are only 3 possible outcomes. Half are the player loses, then a quarter are the player wins and plays another round, and lastly a quarter are the player wins and ends the game. The only case where the player wins is option 3, in all other cases, so 75%, the house wins because the next round has another chance to make the player lose directly at a 50/50 chance or play another round.