http://answers.unity3d.com/questions/160959/quotchain-of-explosionsquot-destroying-gameobjects.html

I asked this question recently and the solution that worked best was Using SendMessage to call a explosion function on the object.

A run down is, so say you have a bomb prefab, each has an overlap sphere which populates an array with all the colliders inside the spheres radius. What you want to do is attach a script to the bomb and make a destroy function that when called iterates through that array and sends the destroy function on those objects.

That should do the trick.

p.s. as SilverTabby pointed out its probably a good idea to leave a few frames between each destroy call so maybe add a few yields.

Here is my script

using UnityEngine;
using System.Collections;

public class BombScript : MonoBehaviour {

    protected Collider[] radiusCollider;

    public static float radius = 3.0f;
    private float bornTime;
    private int bombTime = 5;

    // INIT
    void Start () {
       bornTime = Time.time;
    }

    // Update is called once per frame
    void Update () {
       radiusCollider = Physics.OverlapSphere(transform.position, radius);
       bombMechanics();
    }  

    void bombMechanics(){

// This if statement is basically the bombs timer and is the second value is set in the bombTime variable 
       if((Time.time - bornTime) >= bombTime){   

//This Destroy Call destroys the bomb you dropped once the time runs out.
         Destroy(this.gameObject);

// This foreach iterates through all the colliders inside the overlap sphere and sendMessages the bombExplode method

         foreach (var bombInstance in radiusCollider) {
          bombInstance.SendMessage("bombExplode", SendMessageOptions.DontRequireReceiver);
         } 
       }
    }

    IEnumerator bombExplode(){

// after this is called it waits for a 10th of a second and then calls destroy on this object (for the sake of explanation this would be all
// the other bombs that were in the overlap sphere)

         yield return new WaitForSeconds(0.1f);
         Destroy(this.gameObject);

// this then checks all of the objects that was in its radius spheres before they were destroyed and sends the message to run this method //and so on... until all the bombs are destroyed

       foreach (var bombInstance in radiusCollider) {
          bombInstance.SendMessage("bombExplode", bombInstance, SendMessageOptions.DontRequireReceiver);
         }
    }
}