Bundler could not find compatible versions for gem

Delete the contents of Gemfile.lock, and run bundle install again. That's been working for me.

Did you run bundle update as the error message points out? bundle install handles changes to the Gemfile and bundle update upgrades gems that are already managed by Bundler. The Gemfile.lock file locks in version numbers, bundle update will update any of those that aren't directly specified in your Gemfile (like gem 'rails', '3.0.9').

Deleting the Gemfile.lock will work, but running bundle update is better.