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Dagon comments on Open Thread: June 2010 - Less Wrong
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Citation please? A cursory search suggests that machines go through +EV phases, just like blackjack, but that individual machines are -EV. It's not just that they expect people to plow the money back in, but that pros have to wait for fish to plow money in to get to the +EV situation.
The difference with blackjack is that you can (in theory) adjust your bet to take advantage of the different phases of blackjack. Your first sentence seems to match Roland's comment about the Kelly criterion (you lose betting against snake eyes if you bet your whole bankroll every time), but that doesn't make sense with fixed-bet slots. There, if it made sense to make the first bet, it makes sense to continuing betting after a jackpot.
This comes up frequently in gambling and statistics circles. "Citation please" is the correct response - casinos do NOT expect to make a profit by offering losing (for them) bets and letting "gambler's ruin" pay them off. It just doesn't work that way.
The fact that a +moneyEV bet can be -utilityEV for a gambler does NOT imply that a -moneyEV bet can be +utilityEV for the casino. It's -utility for both participants.
The only reason casinos offer such bets ever is for promotional reasons, and they hope to make the money back on different wagers the gambler will make while there.
The Kelly calculations work just fine for all these bets - for cyclic bets, it ends up you should bet 0 when -EV. When +EV, bet some fraction of your bankroll that maximizes mean-log-outcome for each wager.