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We investigate an incentive mechanism called Bandwidth Exchange (BE) for cooperative forwarding where transmission bandwidth is used as a flexible resource. We focus on a network where two nodes, communicating with the base station (BS) / access point (AP), initially get optimal amount of bandwidth based on direct path transmission and then use their individual bandwidths as flexible incentives for two hop relaying. In our proposed scenario, the forwarder node sends its own data along with the data of the sender in exchange for additional transmission bandwidth, provided by the sender. We compare the performance of the proposed mechanism with optimal bandwidth and power allocation based direct transmission. We use sum rate, max-min rate and min-max power as the evaluation criteria and prove the convex/concave nature of the optimization problem formulations. Our numerical analysis shows that the BE based cooperative forwarding extends the coverage in wireless networks when the far node falls in outage under direct transmission. Further, BE significantly improves the max-min rate and min-max power performance of the network.