What you're looking at is a foam crown designed to be worn by children. Although it appears flat in the picture, when the crown is placed on a person's head, the sides are turned upright creating a home-version of King Friday's royal head wear.
Unfortunately, I know next to nothing about this. Based on the other pieces of memorabilia that were with the crown when I took this picture, my best guess is that it comes from the 1970's and was possibly an item distributed through Mister Rogers' Rainy Day Club.
If anyone has any information on this crown, please fill me in. Better yet, if anyone owns one of these that they're willing to part with, I'd be more than happy to take it off your hands!