Part of the design is that the characters are supposed to be able to keep secrets from each other, and a lot of the design is focused on the idea that you'll surprise each other with your betrayals.

When Swen was participating in co-op with a friend, at one point this led to an awkward real-life conversation about the fact that Swen wanted to kill her temporarily so that he could advance the quest. At another point, he gave her a fake healing potion just to be a troll.

From seeing this, it's easy to see that the point of competitive questing is that it provides narrative motivations that help to foster rivalry between real players. Co-op is the entire point.

While it technically can work in single player, the experience they are trying to create is NOT a single player experience and they don't see it as improving the single player experience.