MBA programs are always trying to increase their yield rates - the number of accepted applicants who actually matriculate into the program. Asking what other schools you are considering helps them determine whether they are your top choice and/or best fit and also the likelihood that you will actually attend if accepted.
Do you mean to tell me that if I am qualified to attend a progam that is my 2nd or 3rd choice, I would be denied admission based on their feeling that I might not decide to attend their program??