The lower portion of the cap is knitted with the smaller needles, so as to make the bottom fit a bit more snug than the rest of the hat. This is usually the case in patterns - often, say, the ribbing at the bottom of a sweater is knitted using a smaller needle size. Also in most cases, the gauge is measured using the larger needles, though it doesn't specify that in this particular pattern. I agree with the previous poster though, go with the larger needle size on your gauge swatch and then adjust accordingly, depending if you gauge was too tight or too loose. If it's bang on, you're good to go!