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An adaptive regenerate and forward cooperative diversity (CD) system using quadrature amplitude modulation (QAM) for a two-user cooperation is proposed. The proposed system can achieve a maximum diversity order of two. The bit error probability (BEP) of a CD system depends primarily on the quality of the inter-user channel and user-to-destination channels, and the transmitted power of the cooperating users. Expressions which characterize the asymptotic behavior of the BEP as a function of the received signal-to-noise ratio (SNR) at the relay and the destination are derived. The transmit power is allocated optimally between the source and the relay according to the channel qualities and the CD system employed to achieve a prescribed BEP. Three power allocation strategies, each for a specific wireless communication scenario, which optimize the power consumption of the proposed CD system are introduced. The cooperative region, corresponding to each power allocation scheme, within which the partners must be located in order to yield a specified cooperative energy gain, is determined.