After I started writing (rambling) this, and more so the further I went, I sort of started to disagree with myself. Or at least think of contradictions. Unless you think tldr keep reading.
If tldr, I agree or ... I disagree or ... I don't know whether I agree or not, or ... I don't know whether any of the prior three options apply.
I am inclined to agree with Wanderboy, and often think exactly the same. I never received any award for just trying or just being in the team. I don't remember ever getting an award for a specific success as a child, except for cub and scout badges. Mind you the only sporting efforts as a child were in school teams, nothing else existed as far as we knew. As far as I can tell there are no psychological after effects.**
But there's also many a time where I've seen the happiness brought to a child receiving a "participation" award, including my sons. More often than not I was on the committee choosing the various trophies for both that and actually winning something. I guess I wasn't prepared to rock the boat.
Now I hold the view that both giving only to winners and rampantly giving a tophy to everyone are "wrong". Getting the right balance is often too difficult and complicated for the organisers (volunteers!) involved (and understandably so). Add the boat rocking concern and we are where we are.
When trophies or whatever are given to everyone for participation that's fine as long as it's clear what they are for. The cricket bat example mentioned by sonar is an excellent example. But that doesn't readily transfer to all other sports.
My sons have on occasions been awarded something for individual or team successes which has always been acknowledged, respected and applauded by their team mates.
And a belated thought, is a sport participation trophy all that different from a certificate for finishing primary school? I say primary school to the exclusion of high school on purpose.
Maybe that's where the trophy for everyone should stop? A medal or trophy or whatever for everyone up to U12 (or 13?), with those for participation clearly indicated. After that selective trophies only? Generally speaking I think that children at 12 or even younger know the difference between gratuitous and meritorious awards. I know I did.
While I think a bit of both is best, if I had to choose one or the other, I'd agree with Wanderboy and opt for dropping participation awards because children can tell the difference.
** Maybe my default lack of confidence would be different!?
I've thought more than once while writing this that I should just forget it and delete it but as I finish this glass of red ....