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Design of efficient dynamic channel allocation (DCA) algorithms has an important impact on performance optimization of wireless mobile networks. The previously proposed DCA algorithms are shown to have good performance but only for certain services and under certain load conditions. Within this paper, we propose a new cost-function-based DCA algorithm, which is fully adaptive to service and load conditions and includes some well-known DCA algorithms such as random, minimum interference, and autonomous reuse partitioning DCA as special cases. By using dynamic system-level simulations, we show that the algorithm provides the same or substantially better performance than these DCA algorithms, with low signalization and computation overhead. We also show the general limits of DCA algorithms in the presence of other interference reduction techniques such as power control and smart antennas.