NEW YORK (AP) _ Kevin Costner got rave reviews in his bomber jacket, Joan Collins's bare- shoulder look was ''fabulous, elegant, lovely,'' and Britain's Prince William got a nod of approval for the little pleats on his pants.

The three were among the celebrities listed by People magazine as the year's best-dressed.

This week's People also gave worst-dressed citations. George Bush was among them because his suit and tie were ''boring.'' Elton John was cited for a ladylike hat, and William's mother, Princess Diana, for her blue jean and T- shirt combo.

Talk show host Morton Downey Jr., one of seven judges, said he is ''sick of royalty that tries to look like common folk.''

Also judging the fashion coups and boo-boos of 1988 were Olympic track star Florence Griffith Joyner, TV's extraterrestrial ALF, country singer Tanya Tucker and designers Vivienne Westwood, Victor Costa and Kenneth Cole.

Mary Tyler Moore, wrapped in a floor-length gown, was declared ''terribly pretty'' by Westwood. Cole called Barbra Steisand ''a beautiful woman with a lot of style.''

Costa said of Corbin Bernsen, ''You couldn't look any better than that,'' and cooed that Audrey Hepburn was ''impeccable, fantastic'' in a draped number of polka dots and stripes.

Joyner, however, said, ''I would only buy something like this if I could get my money back after I wore it.''

The track star herself was among those judged, and her stretch-lace racing tights did not win a gold medal. ''Is this the Olympics or the Folies- Bergeres?'' Downey wondered. Costa said the tights made her look like a Playboy bunny.

Lauren Hutton, too, didn't fare well. Her floral mini by French designer Christian Lacroix inspired Cole to say, ''She is a remarkable woman wearing a remarkable dress that should be worn by someone else.''

Madonna, Cybill Shepherd, Raquel Welch and tennis star Andre Agassi also joined Bush as the year's worst dressed. Of the president-elect, Tucker said, ''What can you do with this guy?''

ALF said of the navel-baring get-up Cher wore at the Academy Awards, ''She has finally found a way to stay off the worst-dressed lists: not wearing clothes.''