It is necessary to clarify one point.
In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which each participant's gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s). If the total gains of the participants are added up and the total losses are subtracted, they will sum to zero. Thus cutting a cake, where taking a larger piece reduces the amount of cake available for others, is a zero-sum game if all participants value each unit of cake equally (see marginal utility).
This is not a zero sum game world.
The augmented reality (AR) world as postulated creates a situation where any person accused of a crime has fifty-fifty chance of being executed. Admittedly they only go back to their last save.
This suggests living, even only as an avatar would be extremely fearful. Presumably any can anybody else of any crime and retribution follows automatically and axiomatically. This would be worst than many totalitarian regimes. Everyone in the AR world would live in fear, and be afraid of everyone else. Of course, they'd want to escape, so if there was a way to escape everyone would try to do it.
It seems remarkably doubtful anyone who knew what they were getting into in this AR world would do so on a voluntary basis. This could be an AR world designed to force people into compliance and obedience for a dictatorship.
However, it is likely to produce mass disobedience on a grand scale. Even the worst dictatorships maintain their authority by keeping enough law and order in a fair manner. This system is grossly disproportionate in its judicial rewards and punishments that even the most docile citizens would feel compelled to rebel.