Multiplayer Loot question

Hello, i am a noob in this game and i have a question. I tried for the first time multiplayer with a friend last night and found out something strange. THe loot the mobs dropped seemed to be shared between the two of us. Can someone explain how it works? because i am used to play these type of games and every player has its own loot, but here it seems to be different. Both of us could see the same stuff on the floor and both of us could pick it up. This aroused some discussion on who should get what. Honestly this could create drama between friends. Can someone esplain how is this thing handled? are there options that you have to check in order for each player to have its own loot? thank you.