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With the current development of mobile devices, short range wireless communications have become more and more popular, and many researches on short range wireless communications, such as Bluetooth, have gained special interests, in industry as well as in academy. This paper analyzes capacity allocation issues in Bluetooth network as a convex optimization problem. We formulate the problem of maximizing the total network flows and minimizing the costs of flows. The hybrid distributed capacity allocation scheme is proposed as an approximated solution of the formulated problem that satisfies quality of service requirements and constraints in Bluetooth network, such as limited capacity, decentralized, frequent changes of topology and of capacities assigned to nodes in the network. The simulation shows that the performance of Bluetooth could be improved by applying the hybrid distributed iterative capacity allocation scheme.