bundle install --without production remediates error message, but why? ( Make sure that `gem install pg -v '0.18.1'` succeeds before bundling)

After creating a Ruby on Rails skeleton (before pushing to master and Heroku) and running: bundle install, I sometimes encounter the following error:

An error occurred while installing pg (0.18.2), and Bundler cannot continue Make sure that gem install pg -v '0.18.2' succeeds before bundling.

The following command remediates the issue altogether: bundle install --without production.

Why exactly does the aforementioned command remediate the issue? As I understand, the command bypasses production environment gems for deployment; so, is my understanding correct and why must this be the case? Thank you!

Here is my gemfile

source 'https://rubygems.org'


# Bundle edge Rails instead: gem 'rails', github: 'rails/rails'
gem 'rails', '4.2.0'
# Use sqlite3 as the database for Active Record
# gem 'sqlite3'
# Use SCSS for stylesheets  
gem 'sass-rails', '~> 5.0'
# Use Uglifier as compressor for JavaScript assets
gem 'uglifier', '>= 1.3.0'
# Use CoffeeScript for .coffee assets and views
gem 'coffee-rails', '~> 4.1.0'
# See http://ift.tt/MqZZdN for more supported runtimes
# gem 'therubyracer', platforms: :ruby

# Use jquery as the JavaScript library
gem 'jquery-rails'
# Turbolinks makes following links in your web application faster. Read more: http://ift.tt/OVlBaz
gem 'turbolinks'
# Build JSON APIs with ease. Read more: http://ift.tt/GXyveo
gem 'jbuilder', '~> 2.0'
# bundle exec rake doc:rails generates the API under doc/api.
gem 'sdoc', '~> 0.4.0', group: :doc

# Use ActiveModel has_secure_password
# gem 'bcrypt', '~> 3.1.7'

# Use Unicorn as the app server
# gem 'unicorn'

# Use Capistrano for deployment
# gem 'capistrano-rails', group: :development

group :production do
  gem 'pg'
  gem 'rails_12factor'
end

group :development do
  gem 'sqlite3'
end

gem 'bootstrap-sass'

group :development, :test do
  # Call 'byebug' anywhere in the code to stop execution and get a debugger console
   gem 'byebug'

  # Access an IRB console on exception pages or by using <%= console %> in views
   gem 'web-console', '~> 2.0'

  # Spring speeds up development by keeping your application running in the background. Read more: http://ift.tt/1fzTFBA
   gem 'spring'
  end