When me and my friend are playing in my world and I kill him his bag drops and I can see it, but for him he cant see his bag where I see it. Instead he sees his bag icon falling through the map and getting farther away when he respawns. I found that it can be fixed by throwing something like a weed stem or a spear at the bag to un-glitch it and then he can see the bag where I see it, but unless I do something to move the bag it remains invisible to him and he has no way of knowing where it is. We both play on Xbox One. 

I've seen the same glitch and it isn't just when player kills another, it can happen any time the player dies.   I once saw my bag flying up into the air, another time my bag was stationary but half way across the yard.  I have discovered that if one player points you to where it really is, you can just click wildly until you pick it up.   Otherwise it may require a log our or restarting the game to correct.  Note: I and my friend play on xbox, my friend is host and we have only seen this glitch affecting me.