Dueling Pennies

A certain strange casino offers only one game. The casino posts a positive integer n on the wall, and the customer flips a fair coin repeatedly until it falls tails. If he has tossed n – 1 times, he pays the house 8n – 1 dollars; if he’s tossed n + 1 times, the house pays him 8n dollars; and in all other cases the payoff is zero.

The probability of tossing the coin exactly n times is 1/2n, so the customer’s expected winnings are 8n/2n + 1 – 8n – 1/2n – 1 = 4n – 1 for n > 1, and 2 for n = 1. So his expected gain is positive.

But suppose it turns out that the casino arrived at the number n by tossing the same fair coin and counting the tosses, up to and including the first tails. This presents a puzzle: “You and the house are behaving in a completely symmetric manner,” writes David Gale in Tracking the Automatic ANT (1998). “Each of you tosses the coin, and if the number of tosses happens to be the consecutive integers n and n + 1, then the n-tosser pays the (n + 1)-tosser 8n dollars. But we have just seen that the game is to your advantage as measured by expectation no matter what number the house announces. How can there be this asymmetry in a completely symmetric game?”