When individuals interact, their phenotypes may be affected not only by their own genes but also by genes in their social partners. This phenomenon is known as Indirect Genetic Effects (IGEs). In aquaculture species and some plants, however, competition not only affects trait levels of individuals, but also inflates variability of trait values among individuals. In the field of quantitative genetics, the variability of trait values has been studied as a quantitative trait in itself, and is often referred to as inherited variability. Such studies, however, consider only the genetic effect of the focal individual on trait variability and do not make a connection to competition. Although the observed phenotypic relationship between competition and variability suggests an underlying genetic relationship, the current quantitative genetic models of IGE and inherited variability do not allow for such a relationship. The lack of quantitative genetic models that connect IGEs to inherited variability limits our understanding of the potential of variability to respond to selection, both in nature and agriculture. Models of trait levels, for example, show that IGEs may considerably change heritable variation in trait values. Currently, we lack the tools to investigate whether this result extends to variability of trait values. Here we present a model that integrates IGEs and inherited variability. In this model, the target phenotype, say growth rate, is a function of the genetic and environmental effects of the focal individual and of the difference in trait value between the social partner and the focal individual, multiplied by a regression coefficient. The regression coefficient is a genetic trait, which is a measure of cooperation; a negative value indicates competition, a positive value cooperation, and an increasing value due to selection indicates the evolution of cooperation. In contrast to the existing quantitative genetic models, our model allows for co-evolution of IGEs and variability, as the regression coefficient can respond to selection. Our simulations show that the model results in increased variability of body weight with increasing competition. When competition decreases, i.e., cooperation evolves, variability becomes significantly smaller. Hence, our model facilitates quantitative genetic studies on the relationship between IGEs and inherited variability. Moreover, our findings suggest that we may have been overlooking an entire level of genetic variation in variability, the one due to IGEs.