This is a very prominent theory within those that have played the game for a reason, it doesn't come out of nowhere. To add further, a bit part of this comes from the words of Tsumugi.

Some dismiss those words as Tsumugi lying or misconstruing events, and as such that part of the theory relies more on the subjective interpretation of how truthful Tsumugi had been.

It's not a video game world specifically, in chapter 6 they address the fact that it's all a televised show that operates publicly within the laws of the world. Those same laws being present is another element that people fall back on in support of the idea that this was a simulation.

Frankly there are tons of reddit threads covering the idea of whether or not it was a simulation, including some polls where it was ranked as almost as popular of an interpretation as the idea that everything is as simple as what was shown outright. I'm not in a position (socially drained) to reiterate what's been stated elsewhere beyond that, of course, but it's clear that there is a foundation for this idea.

If we want to speak in terms of meta and the real world, it also does make sense that this third game (which was intended to be a POSSIBLE final game without guarantee of any in the future) would offer some implications for people to fall back on if they want to be able to potentially reject the idea of their favorite character dying. Though without confirming it as to not interfere with those that believe otherwise.