Phenotypic variability of a genotype is relevant both in natural and domestic populations. In the past two decades, variability has been studied as a heritable quantitative genetic trait in its own right, often referred to as inherited variability or environmental canalization. So far, studies on inherited variability have only considered genetic effects of the focal individual, that is, direct genetic effects on inherited variability. Observations from aquaculture populations and some plants, however, suggest that an additional source of genetic variation in inherited variability may be generated through competition. Social interactions, such as competition, are often a source of Indirect Genetic Effects (IGE). An IGE is a heritable effect of an individual on the trait value of another individual. IGEs may substantially affect heritable variation underlying the trait, and the direction and magnitude of response to selection. To understand the contribution of IGEs to evolution of environmental canalization in natural populations, and to exploit such inherited variability in animal and plant breeding, we need statistical models to capture this effect. To our knowledge, it is unknown to what extent the current statistical models commonly used for IGE and inherited variability capture the effect of competition on inherited variability. Here, we investigate the potential of current statistical models for inherited variability and trait values, to capture the direct and indirect genetic effects of competition on variability. Our results show that a direct model of inherited variability almost entirely captures the genetic sensitivity of individuals to competition, whereas an indirect model of inherited variability captures the cooperative genetic effects of individuals on their partners. Models for trait levels, however, capture only a small part of the genetic effects of competition. The estimation of direct and indirect genetic effects of competition, therefore, is possible with models for inherited variability but may require a two-step analysis. © 2022 The Authors. Evolutionary Applications published by John Wiley & Sons Ltd.