SummaryCooperative communication is an ongoing research area which lies on the basic idea of transmission of information from the transmitter to the receiver with the assistance of a virtual array of relay nodes in between, which will eventually provide the spatial diversity. This paper deals with the resource allocation (bandwidth in this case) among multiple users (source‐ destination pairs) in a cooperative communication environment along with the relay selection when there are multiple relay nodes to assist the transmitting nodes to pass on their data signal to respective receivers. A multi‐user, multi‐relay system model is considered here on which Amplify‐and‐Forward relaying scheme is applied. The bandwidth allocation and relay selection are done based on the Stackelberg game according to which transmitting nodes are treated as purchasers and relaying nodes are treated as vendors. By this planned approach, the transmitting nodes can discover the relays at comparatively better positions and can purchase the optimal bandwidth from those helping relays. By this approach, the relays which are competing with each other can increase their own utilities by demanding the optimal prices and the multiple users which are competing with each other can maximize their own utilities by demanding the optimal bandwidths. Distributed relay selection scheme is applied here which does not require precise information of channel state information as opposed to Centralized scheme and it gives comparable results, too.