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In this paper, an adaptive regenerate and forward cooperative diversity (CD) system based on quadrature signaling is proposed. The bit error probability (BEP) of the proposed CD system is derived in terms of the received signal-to-noise ratio (SNR) at the relay and the destination. The derived upper bound of the BEP is validated by simulations. Further, it is shown that the proposed CD system can achieve maximum diversity order of two and performs better even though the inter-user channel is poor. The power consumption of the CD system is location dependent for given BEP. To optimize the power consumption of the proposed CD system, an optimal power allocation strategy is proposed.