In a typical infrared optical system, the “Narcissus” effect exists extensively. This concept can be extended into a heterodyne detection. In a heterodyne detection, besides the probe and local oscillator beams, a third coherent beam or even more beams caused by spurious reflection might interfere with each other on the surface of the photodetector. Generation of heterodyne signal is dependent on the interference effects between regular and unexpected waves. Based on the theory of PM demodulation, we analyze the effect of multi-beam interference competition in a laser Doppler vibrometer (LDV). A mathematical analysis demonstrates that the signal competition depends on the modulation index, the amplitude ratio of competing signals and their relative phases. The distortion of demodulated signal due to the appearance of ripples or spikes is also predicted in this study. These effects are verified by setting up an all-fiber LDV system for measuring vibration.