Is this story true? It may be. The Gittins book was first published in 1989
The name comes from the 1950s when Frederick Mosteller and Robert Bush decided to study animal learning and ran trials on mice and then on humans. The mice faced the dilemma of choosing to go left or right, after starting in the bottom of a T-shaped maze, not knowing each time at which end they will find food. To study a similar learning setting in humans, a “two-armed bandit” machine was commissioned where humans could choose to pull either the left or the right arm of the machine, each giving a random payoff with the distribution of payoffs for each arm unknown to the human player.