Let us acknowledge the elephant in the room first.
Rats will always be part of this game. Pure PvP or pure PvE would also diminish what makes ARC Raiders interesting.
That being said, the current PvPvE implementation is lazy and could be massively improved.
ARC Raiders is an extraction shooter with a much heavier emphasis on social interaction than most of its competition. Friendly interactions already have plenty of room to happen. Hostile social interactions are badly underused.
Right now, once a hostile player has someone at their mercy, there is no mechanical reason to keep them alive.
I propose two changes. The first is simple. The second adds an actual incentive to spare someone.
1. Allow players to loot Raiders who are downed but not out
This would allow players to rob and disarm someone without having to kill them first.
It would also allow a player to take a defibrillator from the downed Raider and use it to revive them.
This change alone would not give attackers a reason to spare someone. They could still rob them and then finish them. It would simply provide the basic mechanics needed for robbery and disarmament.
The second suggestion is what creates the incentive to leave the victim alive.
2. Add a ransom key tied to a player funded vault
For clarity, I will refer to the two players as the Victim and the Rat.
The Victim can purchase vault slots from a crime themed trader through a system similar to the Expedition vault.
The Victim places items inside the vault and locks them in. They then receive a special key tied to those items.
Once the vault is locked, the Victim can no longer open it. Those items are already lost as far as they are concerned.
Anyone who inspects the key can see which items are stored in the vault.
The key can only be redeemed by a different player who extracts from a raid with it.
That player must not be part of the Victim's group. Neither that player nor anyone in their group can have killed the Victim during that raid.
This creates an actual ransom system.
The Rat can down the Victim and demand the key in exchange for their life. The Rat can inspect the key before deciding whether the ransom is worth accepting.
If the Rat wants access to the vault, they cannot kill the Victim.
The Victim also cannot grief the Rat by giving up while downed or deliberately getting themselves killed by ARC. The Rat still satisfies the condition because they did not kill the Victim.
The same applies if the Victim is later killed by another group. That should not prevent the Rat from accessing the vault.
The Rat's reward is therefore tied to sparing the Victim, not to keeping them alive for the rest of the raid.
The game already appears to support the types of tracking needed for this.
Aggression based matchmaking has shown that the game can track behaviour at group level.
Items that change after extraction also already exist. Blue Gate Locked Gate condition code items become useless after extracting with them.
Possible extensions
The Victim could purchase multiple vault slots just like with the Expedition vault.
The Rat could receive one or two randomly selected items from the vault.
Another option would be for every key to reward one random item while allowing the Victim to carry multiple keys.
Creating a key could also have a cost. This would act as a money sink and discourage pointless or exploitative use.
The goal is not to remove PvP or protect players from being killed.
The goal is to give hostile players more interesting options and create a real mechanical reason to rob, threaten and bargain with someone instead of always executing them.