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In topological spaces, if $Asubset X$ and the inclusion is a homotopy equivalence, that doesn't imply that $X$ deformation retracts onto $A$. For example take one of those examples of a contractible space that doesn't deformation retract to a point.

Even in manifolds, a closed manifold doesn't deformation retract to any proper subset, one can show that with homology as done here by Olivier Bégassat.

So my question is: in the case of a manifold with boundary $(M,partial M)$, with $Nsubset partial M$ a boundary component such that $Nhookrightarrow M$ is a homotopy equivalence, is it true that $M$ deformation retracts onto $N$?

Feel free to assume more hypothesis if needed.

Yes, you get a deformation retract. More formally...

Suppose $M$ is a topological manifold, $Nsubseteq partial M subseteq M$ is a component of $partial M$ and that the inclusion $Nrightarrow M$ is a homotopy equivalence. Then $M$ deformation retracts to $N$.

Here's the idea of the proof:

From Hatcher Algebraic Topology, Corollary 0.20 (pg. 16 in my copy), it's enough to show that $(M,N)$ has the homotopy extension property.

Now, boundary components in topological manifolds are known to have collar neighborhoods (see Morton Brown, "Locally flat imbeddings of topological manifolds", Annals of Mathematics, Vol. 75 (1962), p. 331-341.) This is more well-known in the smooth category, where it is also much easier to prove.

So, some closed neighborhood of $N$ in $M$ is of the form $Ntimes [0,1] = Ntimes I$, where we are identifying $N$ with $Ntimes 0subseteq M$..

Now suppose $f:Mrightarrow X$ is a continuous function (where $X$ is any topological space). Suppose $F:Ntimes Irightarrow X$ has the property that $F(n,1) = f(n)$. We wish to find a continuous function $G:Mtimes Irightarrow X$ satisfying two conditions. First, for any $nin N$, $tin I$, that $G(n,t) = F(n,t)$. Second, for any $min M$, $G(m,1) = f(m)$.

To that end, set $G(m,t) = begincases f(m) & mnotin Ntimes [0,1]\ F(n, maxs,t) & m=(n,s)in Ntimes [0,1].endcases$

To check the first condition, note that $nin Ncong Ntimes 0$ means the corresonding $s$ is $s= 0$. Since $tin[0,1]$, $maxs,t = max0,t= t$, so $G(n,t) = F(n,t).$

To check the second condition, we have $G(m,t) = f(m)$ if $mnotin Ntimes [0,1]$, regardless of the value of $t$. On the other hand, if $m = (n,s)in Ntimes [0,1]$, then because we are taking $t=1$, we have $maxs,t = t$. So $G(m,1) = F(m,1) = f(m)$.

Finally, we must verify that $G$ is actually a continuous function. Since $f,F,$ and $max$ are all continuous, we see that $G$ is a continuous funciton ... as long as it is a function. That is, we still need to verify that $G$ is well defined at the "transition" points where $s = 1$.

But, if $min Ntimes [0,1]$ is of the form $m = (n,1)$, then $s=1$, so $maxs,t = s=1$, so $G(m) = F(n, maxs,t) = F(n,1) = f(n).$