noun
A prize given to someone who did not win, often in a lighthearted or sympathetic way.
じゃんけん大会で負けたけど、残念賞にティッシュをもらった。
I lost the rock-paper-scissors tournament, but I got a pack of tissues as a consolation prize.
参加賞 is a participation prize given to everyone who takes part, while 残念賞 is specifically for those who did not win.
Compound of 残念 (regrettable) and 賞 (prize).