Balancing game mechanics and rewards with player goals and desires, while still encouraging people to play as a group has always been tricky. Players are there to have fun, which usually translates into some sort of reward system, be it in-game cash, leveling up, further quests, or better loot. The foundational goal of an MMO in this case is for there to be a learning curve: go out with your group and learn how to succeed at this encounter by working together as a group, playing off of one another's strengths and weaknesses. In the end, learning and succeeding is the reward.
Unfortunately, this gets lost quickly in the race for better loot - that drop that you need to advance. Players forgo groups in favor of solo farming, or wind up bickering with their group over who gets the loot, moving away from what many consider to be the main purpose of the game.
Psychochild and Ferrel explore some ideas and solutions, as well as suggestions for balancing the goals of both players and developers.