Both the suppliers and purchasers can increase their profits through suitable price discounts. In this pa2 per , a bi-level model representing the decision problemof price discounts and order policies with cooperation of both the supplier and purchaser in supply chain is proposed , and the algorithm based on the difference is used to solve the model . At last , a simple example illustrates that the bi-level model can express the relationship of supply and demand properly and can minimize the total cost of both the suppliers and the purchasers at the equilibrium state.