Peer-to-Peer (P2P) networking is an alternative to the cloud computing for relatively more informal trade. One of the major obstacles to its development is the free riding problem, which significantly degrades the scalability, fault tolerance and content availability of the systems. Bartering exchange ring based incentive mechanism is one of the most common solutions to this problem. It organizes the users with asymmetric interests in the bartering exchange rings, enforcing the users to contribute while consuming. However the existing bartering exchange ring formation approaches have inefficient and static limitations. This paper proposes a novel cluster based incentive mechanism (CBIM) that enables dynamic ring formation by modifying the Query Protocol of underlying P2P systems. It also uses a reputation system to alleviate malicious behaviors. The users identify free riders by fully utilizing their local transaction information. The identified free riders are blacklisted and thus isolated. The simulation results indicate that by applying the CBIM, the request success rate can be noticeably increased since the rational nodes are forced to become more cooperative and the free riding behaviors can be identified to a certain extent. Highlights? We propose a cluster based approach for bartering exchange ring formation. ? The specification of modified Query Protocol of underlying P2P systems is provided. ? We propose a lightweight reputation model for misbehavior accounting. ? The simulation suggests that the CBIM can effectively improve the request success rate of an unstructured P2P network.