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A booby prize is a joke prize usually given in recognition of a terrible performance or last-place finish. A person who finishes last, for example, may receive a booby prize such as a worthless coin. Booby prizes are sometimes jokingly coveted as an object of pride.
Booby prizes may also be given as consolation prizes to all non-placing participants of a competition.
Origin
The word "boob" stems from the Spanish bobo meaning silly, which in turn came from the Latin balbus meaning stammering; the word booby to mean dunce appeared in 1599.
Booby prize literally means "idiot's prize". The OED dates this usage to 1893. Booby trap and "booby hatch" are related terms.