For the current release of v2 IoT Edge (1.0, released in late June 2018), you can't chain edge devices together into a hierarchy. It's a needed feature for many scenarios, but not one we support yet (I'm on the Azure IoT Edge team). We plan to enable it, but I don't have a timeline.
The most immediate problem is this: The IoT Edge runtime builds a SAS-based connection string which it uses to establish a connection to the cloud on behalf of a device. The runtime only knows how to build a connection string that contains the hostname of your IoT hub:
HostName=<hub>;DeviceId=<device>;SharedAccessKey=<secret>
To connect to another edge device instead of your IoT hub, the connection string would need an additional piece of information--the hostname of the other edge device:
HostName=<hub>;DeviceId=<device>;SharedAccessKey=<secret>;GatewayHostName=<edge>
Because of the connection string, the edge device can only communicate with IoT Hub in the cloud, not the IoT Hub-like interface of another edge device.
That's an easy enough problem to solve, however beyond that we don't yet know if there are other blocking issues. Also there's work to be done to ensure the whole experience of creating edge hierarchies works and makes sense.