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The auto industry and Silicon Valley are locked in a battle for control of one of the last unconquered screens: your car dashboard display.

At stake are billions of dollars in revenue from ads and services as well as the balance of power between two big industries. And then there is the future of the dash itself, a source of endless complaints from drivers frustrated by its glitchy concoction of buttons and technologies.

Car makers, trying to overcome this poor track record, are counting on these few square inches to help build closer relationships with customers. Some fear handing control to Silicon Valley. Alphabet Inc. and Apple Inc., meanwhile, are itching to put their familiar screens and apps inside vehicles.

The current state of play is a confused free-for-all as the two industries circle each other warily. Some car makers are turning over their dashboard operating systems to Alphabet's Google entirely. Others, including Ford Motor Co. and Daimler AG, wager they can muster the technological chops to compete.

The average American driver spends 51 minutes a day in the car, according to a study earlier this year by the AAA Foundation for Traffic Safety, making them a literal captive audience.

On future screens, local restaurants, doctors' offices and other services could target ads based on typical driving routes. An insurance company could offer lower rates for cautious drivers, while car makers could use system data to offer service on an aging part before it blows. Some envision a world where users could start watching a TV show at home, then with a voice command continue watching the same program in the car. Others are working on allowing users to order and pay for gasoline and coffee on their screens.

These data-driven products could create as much as $750 billion in new revenue by 2030, including from location-based advertisements and predictive car maintenance, McKinsey & Co. has estimated.

"We see this as the battle for the fourth screen," after the television, computer and mobile phone, said Ky Tang, an executive director at Telenav Inc., a Silicon Valley firm that provides map-based advertising to auto makers competing against Google.

Volkswagen AG is bravely striking out on its own. Keeping control over the reams of consumer data generated by a vehicle's onboard electronics is one reason the company developed its own car computing brain, with its own online store of apps and services. The system will debut later this year on a new generation of Volkswagen-branded electric cars, called the I.D. series.

"Like Android and [Apple] iOS, we are building our own vw.os as the platform," said Chief Executive Herbert Diess during an earnings briefing last month in Germany.

Volkswagen declared internally it would fast-forward efforts to combat Silicon Valley's encroachment into cars after a private meeting in 2016 between Google Chief Executive Sundar Pichai and Mr. Diess, then chief for the VW brand, according to people familiar with the matter.

Mr. Pichai explained how Google wanted the data to improve the user experience, and asked if Android were installed whether Google could access the car's fuel levels, people with knowledge of the meeting said. That way Android could determine the need for gas and offer directions to a fuel station, the people recalled Mr. Pichai saying at the meeting.

Mr. Diess was concerned about the privacy of this information and walked away convinced that Google would be more a competitor than partner, the people said.

A Google spokeswoman said the company works in collaboration with its car-manufacturing partners, and prioritizes their needs to meet market demands and optimize the driving experience. She also pointed to the company's data-collection policy, which requires it to get driver approval before accessing any information.

Data privacy is a particular concern for German car makers, especially with Silicon Valley's use of consumer data coming under greater scrutiny in Europe.

BMW currently allows users to plug their Android and Apple phones into their system, but doesn't use the Android operating system to power its screens.

BMW has worked to improve its own system since it surveyed its customers in 2015 and found that no one was using the expensive multimedia displays designed by the auto maker, turning to their phones instead to play music and pull up directions, according to the former executive.

Fearing Google would become the default for in-car maps, BMW executives decided they needed to improve. That same year, BMW joined rivals Volkswagen and Daimler to buy mapping firm HERE for $3.1 billion from telecom-equipment maker Nokia Corp.

Daimler used its own developers to build the software backbone for Mercedes-Benz's new MBUX multimedia system, including a natural-speech assistant called "Hey Mercedes." The system gives the company strict control over outsider access and what flashes across the screen.

In Detroit, Ford hired 400 engineers from BlackBerry Ltd. in 2017 to bolster its in-house software expertise and to help develop new in-car digital features that will roll out next year.

Other makers are taking a middle-of-the-road approach. General Motors Co. has based its system on free software from Google but highly customized it to create its own experience.

Beyond Apple and Google, other tech companies are working to get their offerings incorporated into car systems. Samsung Electronics Co., the world's largest smartphone maker by sales, purchased auto-supplier Harman International Industries Inc. for $8 billion two years ago to get its hardware into cars. Harman showed how it can integrate video screens and user experiences in the car at the annual CES tech show in January.

Microsoft Corp. is also edging in, providing auto makers such as Volkswagen and BMW with cloud-based services that help them beam down new apps and software to the car. Amazon.com Inc. is in the midst of rolling out its Alexa voice assistant in BMW, Toyota and Volkswagen models, though it's limited in what it can do.

Questions:

1. Describe the tradeoff involved in an auto manufacturer's decision whether to develop a proprietary dashboard display operating systems or to contract with a tech firm to do so. What are the advantages to auto manufacturers of designing displays that can be updated? Why might auto manufacturers be reluctant to update displays of late-model cars?

2.Consider the following game in which Firms 1 and 2 simultaneously choose technology A (e.g., Android) or technology B (e.g., iOS). Let Profit_i^AAdenote firm i's profit if both firms adopt technology A, Profit_i^BBdenote firm i's profit if both firms adopt technology B, Profit_i^ABdenote firm i's profit if both firm i adopts technology A and firm j adopts technology B, and finally Profit_i^BAdenote firm i's profit if both firm i adopts technology B and firm j adopts technology A. Suppose: Profit₁^AB>Profit₁^BB; Profit₂^AB> Profit₂^AA;Profit₁^AA> Profit₁^BAand Profit₂^BB> Profit₂^BAWhat is the Nash equilibrium of the game? Explain.