Grocery shopping constitutes a large part of private consumption. Together with large stores in external locations, there is currently a trend towards further development of smaller grocery stores that are geographically close to the consumer. The overall aim of the research project is to make a dynamic analysis of demand and market structure in the Swedish grocery trade. We use newly developed models and methods with deep theoretical grounding and take into account that stores differ in size, location and service level. The first part consists of a detailed analysis of consumers' choice and valuation of different store formats from a geographical perspective. The second part deals with firms' decisions and costs to establish, reallocate and remove stores from local markets. A unique combination of databases covering all grocery stores in Sweden during the period 2001-2010 will be used. A central contribution of the research project is that we simulate the development of the grocery market as a result of a number of hypothetical changes such as a changed number of store formats and a more liberal regulation of new establishments. The project contributes to the international research front by using models based on economic theory together with newly developed statistical methods to analyze strategic interaction between firms.