In this paper we propose a reputation-based incentive scheme for detecting DoS attacks that target the network layer services. The scheme is based on clustering architecture to provide localized and scalable solutions. It involves a node history-based reputation update mechanism where more weights are given to the most recent reputation values. Load balancing feature was introduced to reduce the forwarding overhead on cooperative nodes. We evaluated the performance of the proposed scheme using simulation experiments. We studied a network with selfish nodes where the attack involves dropping packets. The effect of dropping control and data packets is investigated with and without load balancing. The results indicated that localized reputation-based incentive solutions can significantly increase packet delivery ratio in the presence of selfish nodes with limited communication and packet processing overheads.