In a public mobile ad hoc network (MANET), users may be selfish and refuse to forward packets for other users. Therefore, an incentive mechanism must be in place. We adopt the "pay for service" model of cooperation, and propose an auction-based incentive scheme (called iPass) to enable cooperative packet forwarding behavior in MANET. Each flow pays the market price of packet forwarding service to the intermediate routers. The resource allocation mechanism in our scheme is based on the generalized Vickrey auction with reserve pricing. We prove that in our scheme, user's truthful bidding of utility remains a dominant strategy, users and routers have incentive to participate in the scheme, and packet forwarding always leads to higher social welfare for the whole network. We design a signaling protocol to implement the scheme, and show that it can serve as an explicit rate-based flow control mechanism for the network. Therefore, iPass is a joint solution of incentive engineering and flow control in a noncooperative MANET. Simulation results show that iPass is able to determine the auction outcome quickly, and at the same time achieve the goals of flow control.